Regina, Sask.-Viterra reported net earnings of C$96.0 million on sales of $1.4 billion for the fourth quarter ending July 31, 2007, up from the year-ago $13.5 million and $601.1 million. For the year ending July 31, net earnings were $108 million on sales of $2.6 billion, versus the year-ago $531,000 and $1.6 billion, respectively. Viterra is the new operating name for the Saskatchewan Wheat Pool Inc. and Agricore United, (AU). Results for AU are only included for the two months since the acquisition date of May 29, 2007, and are not included in year-ago amounts. Viterra has announced plans to change its financial year-end to Oct. 31. As a result, 15-month results will be released after that date. Sales and other revenues from Viterra’s Agri-Product segment were $588.3 million for the fourth quarter, up from the year-ago $340.0 million. Segment gross profit and net revenues from services rose to $142.9 million, up from $48.0 million, with much of this attributable to improved fertilizer margins. EBIT was up, at $95.9 million from the year-ago $28.2 million. Full-year sales results were $810.6 million, up from $539 million. Gross profit was $183.2 million, up from $77.1 million. EBIT was $93.4 million, up from $14.7 million. Crop protection sales led the way in the fourth quarter, but fertilizer led for the year.
U.S. Gulf/Tampa: A new wave of business at Tampa is pointing to higher prices. While Mosaic was reported to have bought two partial cargoes from Yuzhnyy at the existing $297/mt DEL, another deal for tons from Terra’s Trinidad operations was reportedly inked at $303/mt DEL. The latter increased seller resolve to move prices up.
In the meantime, Mosaic was reported to have sold a couple of prompt barges at the $270/st FOB mark.
DOC statistics may help explain the late summer slump in Tampa prices, as ammonia imports were up 43 percent into the U.S. in July. According to DOC, July 2007 imports were 792,844 st, up from the year-ago 553,287 st.
Eastern Cornbelt: Although a lot of prepay ammonia was booked earlier at the $465/st FOB level for fall, sources last week pegged the cash market at $480-$490/st FOB regional terminals, with the low in Illinois and the upper end in Indiana. One supplier was offering forward contract ammonia for October through December at $490-$500/st FOB in the region.
Western Cornbelt: The ammonia cash market was generally quoted at $465-$475/st FOB in the region, with few new sales to test the market. Sources talked of a significant amount of prepay already booked for spring 2008, with claims that one supplier has sold 20 percent of their allocated spring tons in the $500-$510/st FOB range to the dealer. On a forward contract basis, another supplier was referencing ammonia for October through December at $475/st FOB in Nebraska, $485/st FOB in Iowa, and $490/st FOB in Missouri.
Northern Plains: Sources quoted the regional ammonia market at $480-$485/st FOB to the dealer, with the upper level reflecting forward contract reference pricing for October through January. Delivered ammonia was pegged in the $490-$495/st range in North Dakota. Dakota Gasification’s plant at Beulah, N.D., was back to full rates after some summer downtime, and sources reported a recent plant turnaround at Leal, N.D., as well.
Southern Plains: Coffeyville Resources said last week that it fielded multiple calls after an incident Sept. 6, with callers asking about an “explosion.” It issued the following statement: “While we don’t discuss operational details, the refinery is up and running. There has been no explosion. We had a loss of instrument air to our refinery yesterday which was caused by a ripple effect of an outage from a supplier to our nitrogen fertilizer operations. As a standard procedure, we briefly evacuated non-essential personnel from the refinery.”
Eastern Canada: With no fall ammonia business in the region, sources reported no updates for that market. The last price quote had rail-DEL ammonia at the $595/mt mark in Ontario and Quebec from locations in Western Canada. One source said growers will probably start inquiring about spring 2008 ammonia in December.
Trinidad: Yara continues to negotiate with the Oilfield Workers Trade Union (OWTU) after the July 31 expiration of a three-year contract. While OWTU members staged a protest in August, according to the local press, Yara said last week that there has been no work stoppage as a result of the contract negotiations. However, one plant was down for two weeks but has restarted. The outage was due to technical issues and statutory requirements, said the company.
Black Sea: Continued strong demand from Europe and the U.S. is providing a solid floor on prices and an ever so gentle nudge upward. Asian sources report the price remains in the high $260s/mt FOB, while others report they have moved up.
As plants come off turnarounds, pressure on the price is expected. For most of August and early September, availability of material was limited by a series of rotating shutdowns. Sources say by the first of October all the plants will be back in full operation.
Middle East: With only contracts being fulfilled at this time, sources say there are no concrete markers to signal price changes. Observers are forced to use other indicators to figure out where a spot price might be if a deal is made.
The denial of an export permit for urea prompted an Iranian producer to shift to ammonia, and thus provided new business that pushed the floor into the $220s/mt FOB. The swiftness exhibited by Yara to snap up the tons late last month indicated to some how short Yara was.
Reports continue to circulate that reserves are building. Indian buyers are taking the minimum quantities required by their contracts. While other buyers are also taking their contracted tons on time, it is the lack of additional Indian business that is driving the concern about the regional ammonia market.
Indian phosphate producers are not getting the necessary inputs for full production. Some say it is a shortage of phos acid, others say it is a shortage of phosphate rock, and still others say it is a combination of both. Whatever the reason, ammonia demand is down in India, and that means the Middle East producers are being forced to stockpile tons that normally would have been shipped.
For one observer, the growing stockpiles in the producers’ tanks can only mean continued downward pressure on prices.
An Asian source said the $220/mt FOB price represented the floor. He expects to see prices rebound slightly as some Asian demand gets stronger. He noted that material that might have been sold by Indonesian producers may not materialize, forcing buyers to look to the Middle East or elsewhere.
Until some new public business can be confirmed, sources are putting the market at $220-$225/mt FOB.
Asia: The joint venture operations in Indonesia – KPI and KPA – are slated to go down starting next month. Each plant will be closed for routine maintenance for three to four weeks each. Sources report the Asian market will experience a tight market through November as a result.
Downstream users of ammonia are said to be comfortable with both the quantity of ammonia they are receiving and the prices received for their final products. Any tightness and subsequent run-up in prices that may occur should be absorbed easily, said one source.
Once KPI and KPA come back online, sources say at least one Japanese buyer may take more of the Indonesian output than previously planned.
The company is said to be ready to reduce production at one of its older and less efficient facilities in Japan in favor of imported Indonesian tons.
A number of Japanese producers are just coming off a two-year program of updating existing plants.
Some of the plants were forced to shut down in 2005 because of safety violations. At the time, the plant operators scrambled to ensure their customers were covered. Many turned to importing material.
Now that most of the upgrades are completed, sources say imports will be used to supplement domestic production when the international market moves in a favorable direction.
UREA
U.S. Gulf: Granular barges were called stable-to-firmer last week. Many sources called the market $332-$335/st FOB early-to-midweek, with numbers firmly within that range. However, others reported that later in the week $337-$338/st was actually done, not just quoted. One player said current NOLA numbers do not adequately reflect rising inland numbers.
In the meantime, a Sabic vessel was reportedly on the outskirts of NOLA and its product was already sold. Regardless, buyers point to various other cargoes slated to come in later in the year as giving them more opportunities to buy at a lower price.
Prills continued to be strong, with the last done business called $345/st FOB.
U.S. urea imports were up 31 percent in July – to 299,994 st, up from the year-ago 228,377 st.
Eastern Cornbelt: Granular urea pricing was up from last report, with the dealer market quoted at $365-$370/st FOB in the region.
Western Cornbelt: Granular urea was tagged at $365-$375/st FOB, up slightly from last report, with the upper end reflecting new dealer reference pricing out of some Iowa warehouse locations.
Northern Plains: Granular urea was $365-$370/st FOB the Twin Cities, with reference pricing at the $380/st FOB mark in North Dakota. On a delivered basis, North Dakota sources pegged the urea market at $385/st last week. Effective Aug. 27, Agrium’s urea postings moved to $380/st FOB Shakopee, Minn., and North Dakota terminals at Alton, Carrington, Colfax, Marion, and Scranton. The company’s rail-DEL price in Minnesota, the Dakotas, and Wisconsin moved on that date to $385/st.
Northeast: The granular urea market was quoted at $365-$370/st FOB Baltimore early in the week, but some sources said the dealer market had firmed to $380/st FOB reference levels as the week progressed. The Philadelphia urea market was also quoted in the mid-$360s/st FOB early last week, but sources reported minimal inventories there. Urea pricing FOB Savannah, Ga., remained at the $360/st level. On a delivered basis, one Pennsylvania dealer tagged the urea market at $390/st last week.
Eastern Canada: Sources quoted the granular urea market at $455-$479/mt FOB, up slightly from last report, with the upper end reflecting dealer reference levels at some Ontario locations.
India: It appears that by week’s end, IPL nailed down at least 150,000 mt at $335/mt CFR.
Sources say Ameropa, ConAgra, and Transammonia each sold a cargo under what is now being described as pre-tender deals. Reportedly, the tons are all coming from China.
Asian sources confirm that at $335/mt CFR others might also get involved.
At that rate, $315/mt FOB from the Middle East is possible, as are tons from Bangladesh. The only loser would be Yuzhnyy.
All told, sources say Indian buyers need to secure 1.5 million mt by the end of the year. Buyers have been disappointed to see the price move up so quickly. Traders in Asia said IPL and MMTC should not have been surprised to see the price increases that have taken place in the past four weeks.
Observers expect to see IPL call its tender either by the end of last week (Friday, Sept. 14) or by some time during the TFI conference in Boston this week. One trader expected to see the IPL and MMTC representatives working hard to glean as much information as possible from the TFI participants. At the same time, those left home will be expected to keep in touch with producers to follow pricing trends.
A tender is necessary to ratify the deals already concluded.
Earlier, sources estimated IPL and MMTC would work out a series of at least three final tenders for 2007. Each tender would take about 500,000 mt. If the prices were favorable, more would be taken in the early tenders.
Middle East: Rumors that IPL/India has concluded at least three cargoes out of China at $335/mt CFR lifted the spirits of producers. Some were so elated, report sources, that instead of looking to settle deals at $315/mt FOB right away, some producers argued the new price should be $320/mt FOB.
The mantra out of the region seems to be that producers are saying “if” they had a cargo, they would sell it at $320/mt FOB. By and large, the whole region is unanimous in its position that spot cargoes are out of the question for the rest of the month. The October orders, however, are reportedly thin.
Asian sources said that at $315/mt FOB the producers would be ahead of previously done business and could still match the pre-tender deals IPL made with at least three trading houses.
One trader noted that with $20/mt freight and IPL setting $335/mt CFR as their target price, anything more than $315/mt FOB out of the Middle East will most likely be rejected.
The only main bit of business firmly on the books is the granular urea to be sent to the U.S. under long-term contracts. And while that will help keep the granular market from downward price pressures, it does nothing for the prill market.
As a price buyer, India will accept whatever product is available, whether it is prilled or granular. But it will only do so if the price is right.
China: The three cargoes reportedly concluded with IPL/India are slated to come from China.
The estimated netback on the deals is $275/mt FOB.
Sources peg the Chinese market at $275-$280/mt FOB for prills. Granular material is no longer being offered to the international market.
Lifting of tons from China is on hold until Oct. 1, when the export duty drops from 30 percent to 15 percent.
In addition to the Indian business, at least three cargoes for Peru, Mexico, and Brazil are said to be committed for October shipping.
Once October begins, sources say vessels will be anxious to load up and get out of port as quickly as possible. They may have to wait, however. Besides the delays that normally occur when many vessels vie for limited berthing facilities, the first week of October is usually deemed a “Golden Week” by the central government. That means the plants and ports are shut down to allow more people opportunities to celebrate the holiday. Oct. 1 is the national day in China.
Sources say the domestic stockpiles are sufficiently high, and once the initial rush of vessels is past, China will continue to ship its urea offshore.
Black Sea: The price has moved up on demand from Europe.
Demand from Latin America is also responsible for some of the price increase, but sources say it is unlikely that Yuzhnyy material will find its way to South America unless the price ends up closer to $300/mt FOB.
Some cargoes booked earlier this month might fit that pricing prescription. The current price wishes of the producers, however, are much higher than the buyers are willing to pay at this time.
Likewise, unless producers agree to drop their prices by as much as $40/mt, they will be left out of any upcoming Indian business.
Producers are now saying they should be paid $320/mt FOB. Nothing at that level was reported last week, but one source did say that $318/mt FOB was done late last week.
Vietnam: Industry sources estimate about 650,000 mt was imported from China along the border. Sources say that amount, along with domestic production, gives the country sufficient stockpiles for the upcoming season.
The government figures imports were closer to 370,000 mt.
The difference between the two is written off by area observers as differences in reporting exactly how many tons really were sent across the border to Vietnam.
According to Vietnamese media reports, the government is concerned about lower than hoped for reserves and rising international urea prices.
Indonesia: Now that prices are edging up, sources report buyers of previous Indonesian tenders are moving quickly to lift the tons they won in the past couple of months.
For a while, the cargoes sat in storage waiting to be picked up or were re-offered for sale. Now that the Mideast, China, and Yuzhnyy prices are on their way up and IPL/India is looking to buy, arrangements are being made to get the urea away from the plant and into the hands of international traders.
Sources say the previous efforts to limit exports appear to have been pushed aside in favor of the hard currency earned by off shore sales.
The state-owned companies must pay for their natural gas inputs in U.S. dollars. Domestic sales do not earn the hard currency necessary to cover those bills.
Pusri is expected to call a tender this week.
Soon after that, Kaltim will most likely come into the market as well.
Bangladesh: BCIC has issued a tender to import 50,000 mt of granular urea and 50,000 mt of prilled urea in bags in a maximum of four lots on a CFR Chittagong or Mongla Port basis under cash foreign exchange. The minimum offer quantity is 12,500 mt for each. Offers shall be received up to Oct. 24 and will be valid up to Nov. 24.
NITROGEN SOLUTIONS
U.S. Gulf: UAN barges were reported to be hard to find. Most were putting them within the $270-$275/st FOB ($8.44-$8.59/unit) range. Generally, price ideas were up. Sources pointed to the paper market, where they were reported to be trading at $280/st plus on a forward basis.
July imports were up 29 percent to 165,861 st, up from the year-ago 128,357 st.
Eastern Cornbelt: UAN remained at roughly $9.30-$9.60/unit FOB regional terminals, with the lower numbers out of spot river locations. On a forward contract basis, reference prices for UAN-32 from one supplier ranged from $9.56-$9.86/unit FOB in the region for October through January, 2008.
Western Cornbelt: UAN-32 was steady at $295-$310/st ($9.22-$9.69/unit) FOB regional terminals, with the upper end reflecting dealer reference prices out of some locations. One Iowa source pegged the common dealer price last week at the $9.40/unit FOB mark, but reported no new sales to test that level.
Northern Plains: UAN-32, if and where available, was pegged at roughly $305-$312/st ($9.53-$9.75/unit) FOB regional terminals, with delivered UAN-28 quoted firmly at the $275/st ($9.82/unit) mark in North Dakota. One regional supplier was referencing forward contract UAN-32 for October through January at the $317/st ($9.91/unit) mark FOB Pine Bend, Minn.
Northeast: The UAN-30 market was up slightly from last report. Pricing FOB Baltimore was pegged at $253-$257/st ($8.43-$8.57/unit) last week, while the dealer market FOB Seaford, Del., was tagged firmly at the $258/st ($8.60/unit) level through the month of September.
Dealer reference pricing for UAN-32 out of terminals in upstate New York was quoted at the $310/st ($9.69/unit) FOB level before discounts, also up from last report. UAN-32 vessel replacement values were reportedly being indicated at the $300/mt mark C&F for new business. Sources said terminal pricing still has a long way to go to catch up to the vessel market.
Eastern Canada: UAN was pegged in the $11.25-$11.65/unit FOB range, with reference levels for UAN-28 reported as high as $330/mt ($11.79/unit) FOB in the region.
AMMONIUM NITRATE
U.S. Gulf: Like UAN, AN barges were reported to be firm-to-strong – assuming you could find a barge. The most recent business was called $272-$275/st FOB, with sellers quoting $280/st FOB.
Imports were up 59 percent in July to 67,542 st, up from the year-ago 42,532 st.
Western Cornbelt: Ammonium nitrate remained at a nominal $320-$325/st FOB in the region, where available.
Eastern Canada: Ammonium nitrate was quoted at $365-$375/mt FOB in the region last week.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate was steady at $220-$240/st FOB.
Western Cornbelt: Granular ammonium sulfate was tagged at $220-$230/st FOB last week.
Northern Plains: Granular ammonium sulfate continued to be quoted at $210/st FOB and $210-$215/st DEL in the region, but a near-term increase was slated to firm the market to $220/st FOB and $225/st DEL. Agrium’s ammonium sulfate postings will move up on Sept. 22 to $225/st rail-DEL in Minnesota, Wisconsin, the Dakotas, and Nebraska.
Northeast: Granular ammonium sulfate was reported at $220-$225/st FOB in the region, with the low at Philadelphia and the upper end FOB Caledonia, N.Y., and E. Liverpool, Ohio. On a delivered basis, sources pegged the regional market at $230-$250/st, depending on location.
Eastern Canada: Granular ammonium sulfate remained at $295/mt FOB or rail-DEL in Ontario and Quebec.
U.S.: Imports were up 125 percent in July, to 24,042 st from the year-ago 10,696 st.
PHOSPHATE
Central Florida: Although some phosphates are being sold on a prompt basis out of Central Florida, the vast majority of the shipments currently being loaded were booked months ago.
New orders have been slow coming, and sources said it was because most dealers had filled their bins in early summer and were waiting for the space to empty before reordering.
Houston has had the wettest year since the 1940s, and that has caused a problem for Agrifos’ gypstack – and Hurricane Humberto late last week did not help the situation. The company was working with state and federal agencies to resolve the problem, and was discharging treated water and looking into other options. However, the situation will probably not affect phosphate production, because production consumes water.
Last week, the Central Florida DAP price range remained a flat $385/st FOB. CF and Mosaic had both set prices at $385/st FOB. Mosaic’s asking price was $381/st FOB for MAP, while CF was listing a price of $385/st FOB. PotashCorp’s Central Florida reference price remained at $385/st FOB. In Texas, Agrifos raised its truck price to $430/st FOB, and $410/st FOB for railcars, but was sold out through the end of September for rail-delivered phosphates.
In the meantime, concerns persist that a short supply of sulfur could eventually crimp phosphate production (see Sulfur section).
U.S. Gulf: Normally, sales on the Arkansas River are in full swing at this time of year, but the harvesting of the devastated wheat crop delayed the planting of corn, which was just beginning to be harvested last week. As a result, terminals there were well stocked and in no need of resupply. However, in the northern cornbelt areas served by the Ohio River, business was just beginning to pick up last week, and some barge sales for resupply were made.
The Army Corps of Engineer still had not issued a report on the progress of dredging north of Lock 17 at Muskogee last week, but barge traffic, which has been moving single file through a narrow channel, was not backing up. The season there has not taken off yet, and dealers were in the dark about what farmers will be doing. Farmers will be faced with paying much higher prices for fertilizers this season compared to last season and last year, and it was not known whether they would use as much fertilizer to take advantage of significantly higher grain prices. A reduction in fertilizer applications would reduce crop yields.
MAP was in short supply in the Gulf market and was actually bringing a higher price than DAP, which was the inverse of the norm.
Although warehouse sales were below normal for this time of year, traders and dealers pointed out that they still have until around the first of November to continue moving product. If supplies begin running low and producer inventories are low at that time, some buyers may make a move to ensure they have their bins full when spring rolls around. The ongoing sulfur shortage, which continued to worsen last week, could result in a reduction of inventories if phosphate production is curtailed.
The number of barge sales was up slightly last week compared to the previous week, but prices remained soft. One source reported purchasing a barge for delivery in November at $398/st FOB. A large number of sources said they had offers at $395-$396/st FOB, and one said offers were made sub-$395/st FOB; however, none of those actually made purchases.
The NOLA DAP barge price range last week changed from $398-$405/st FOB the previous week to $397-$400/st FOB. Prices will likely move back into the $400/st FOB range within the next couple of weeks, when resupply begins.
Eastern Cornbelt: DAP remained at $430-$438/st FOB in the region, with most dealer quotes reported at the $435/st mark FOB river terminals, give or take. MAP was steady at $430-$435/st FOB, and 10-34-0 was pegged at $350-$360/st FOB.
Western Cornbelt: DAP and MAP were unchanged at $430-$435/st range FOB regional warehouses to the dealer. 10-34-0 pricing was firm at $350-$365/st FOB.
Northern Plains: DAP was pegged at $435-$441/st FOB regional warehouses, while MAP was quoted in the $435-$438/st FOB range. North Dakota sources tagged the MAP market at $445-$455/st DEL, depending on supplier and point of origin. 10-34-0 was up from last report at $365-$375/st FOB in the region.
Agrium’s phosphoric acid prices for Minnesota and the Dakotas firmed on Sept. 1 to $690/st rail-DEL for merchant grade acid (MGA) and $700/st rail-DEL for super phosphoric acid (SPA). Postings for both products will increase by $15/st in October, followed by additional $10/st increases in November and again in December.
Northeast: Phosphate pricing was up from last report. Sources tagged the DAP market at $446-$450/st FOB, with the upper end quoted in New York. MAP was also quoted in the $446-$450/st FOB range, with the low FOB Philadelphia. Delivered MAP was pegged as high as $457/st to points in southern Pennsylvania last week. 10-34-0 pricing had firmed to $330/st FOB tank locations in upstate New York.
Eastern Canada: Sources said they expect good fall movement of phosphates and potash on winter wheat ground. MAP was pegged at $550-$560/mt FOB in the region. TSP was quoted at a nominal $545/mt FOB. No current prices were reported for DAP in the Eastern Canada region.
U.S. Export: Both PhosChem and Transammonia made phosphate sales last week into Latin America. PhosChem sold 15,000 mt of MAP to Brazil at $440/mt FOB, which was higher than the current price range for DAP. A shortage of MAP was said to be pushing up the price. Transammonia sold 11,000 mt of DAP produced by Mississippi Phosphate into Mexico at a price that was within the price range of DAP, $430-$433/mt FOB.
The world market for phosphates tapered off last week, as buyers have already placed massive orders and producers were running low on inventories.
The U.S. DOC reported phosphate exports declined in July of 2007 compared to the same period last year. DAP exports fell 30 percent, from 578,430 st to 403,182 st this July. MAP exports dropped 49 percent, to 137,496 st from 271,797 st in July 2006.
The price range for export DAP remained unchanged last week at $430-$433/st FOB.
Bangladesh: BCIC has issued a tender to import 30,000 mt of phosphate rock (65.5 percent BPL Min.) on C&F Chittagong on a liner terms basis under a cash foreign exchange. Offers shall be received up to Oct. 18 and should be valid up to Nov. 18.
POTASH
Eastern Cornbelt: Potash was quoted at $260-$270/st FOB regional warehouses, depending on grade and location, with inventories described as very tight.
Western Cornbelt: Potash pricing continued to firm on very tight and strictly allocated inventories. Sources tagged the market last week in the $267-$275/st FOB range, with the upper end reflecting reference levels and confirmed sales for granular tons out of Iowa warehouses.
Northern Plains: Price quotes for potash continued to firm, sources said. New sales FOB the mine were strictly allocated and reportedly based on October pricing levels. Sources tagged the market FOB Saskatchewan mines at $222/st for standard, $227/st for soluble and granular, and $232/st for white granular, up $20/st from early summer fill levels. Out of regional warehouses, potash was quoted at $260-$270/st FOB, depending on grade and location.
Northeast: Coarse potash was reported at $257/st FOB E. Liverpool last week. Delivered potash in Delaware was reportedly moving to the $264/st level on the low end. At the upper end of the range, dealer pricing for red granular potash was referenced at the $275/st mark FOB Caledonia, N.Y., while postings for delivered soluble potash had reportedly firmed to as high as $306/st DEL to some locations in the region.
Eastern Canada: Potash pricing was up from last report. Out of regional warehouses, the market was quoted at $321-$328/mt FOB. Effective Oct. 1, postings will move to $333/mt FOB the warehouse and $288/st FOB New Brunswick mines, with the mine price reflecting a $15/mt increase from previous levels.
Ontario sources pegged the sulfate of potash price last week at $510/mt FOB, also up from last report.
U.S.: U.S. imports for potassium muriate were up 28 percent for July, to 689,911 st, up from the year-ago 537,304 st.
SULFUR
Tampa: Humberto, the hurricane of the week, formed quickly in the Gulf near the coast of Texas last week and immediately began causing problems for some refineries in its path. It grew from a low-pressure system to hurricane status in just 14 hours. Valero’s Port Arthur plant lost all power last Thursday and shut down. In addition, that company’s refinery at St. Charles was making preparations for the storm the same day. The Motiva facility at Port Arthur was also said to have been shut down by Humberto; ExxonMobil’s plant there was still operating on Thursday, but was experiencing flooding. At Beaumont, a belt on the ship loader at Martin’s prill facility was damaged by the storm and was temporarily out of service. At press time, the storm was still moving inland, and other refineries could be affected.
One source described recent events as the “perfect storm” for the phosphate industry in Florida. With sulfur supplies critically low, Mosaic’s Sulfur Enterprise was in dry dock, Mexico’s Pemex missed delivering a vessel to Tampa as a result of Hurricane Felix, terrorists blew up some Pemex natural gas supply pipelines that provide sulfur in Mexico, and Humberto forced the sulfur vessel Margaret Sue to divert to avoid the storm and was to be delayed at least a day. The industry was waiting to determine how other refineries along the Gulf Coast fared. “Just-in-time” sulfur deliveries were the order of the day at Tampa. How that situation will affect phosphate production in Central Florida was unclear last week. Supplies of sulfuric acid were as tight or tighter than molten sulfur.
Discussions for fourth-quarter sulfur prices will likely begin at the TFI World Conference at Boston this week, but it appeared unlikely contracts will be resolved then. “No one wants to take the lead,” a source said, “because they are afraid they will be seen as either greedy or stupid.” There appeared no doubt prices will get a bump up, but nobody was able to say how much, or even if it will be single or double digits.
At Beaumont, a sulfur vessel was loaded with 31,500 tons of prill for Brazil early last week, and a second load of 30,000 tons was scheduled to be loaded later this month for Morocco. Another vessel will most likely depart Beaumont in October, but that will pretty well clean out inventories there.
West Coast: The sulfur industry was “licking its chops” last week after Fertinal, which was in the process of bringing its phosphate processing plant at Baja California back into operation after being shut down for several years, signed a contract to buy sulfur from California at a high price. Spot prices on the West Coast have increased to as much as $120/t, and demand was high.
However, some suppliers on the West Coast have pretty well lost their agricultural customers to the surging prices. One source said his company had loaded only a single truck this quarter.
Vancouver: Negotiations for new semester contract prices for Brazil were still officially underway, but will probably not be settled anytime soon. Canadian producers would rather wait and see how high the market will go before they have to settle.
U.S. Imports: Imports were off 26 percent in July, down to 120,206 st from the year-ago 163,471 st.
MARKET NOTES
Pakistan: The country produced 6.050 million mt of urea, DAP, and other fertilizers during the last financial year 2006-07 (July-June), compared to 6.260 million mt a year ago, showing a drop of 3.54 percent. According to a report of Pakistan’s National Fertilizer Development Centre (NFDC), during the period the country produced 4.731 million mt of urea and 1.318 million mt of DAP and other phosphatic fertilizers (the net DAP production was 397,747 mt).
Bangladesh: The government plans to set up two new urea manufacturing factories, each having capacity of 560,000 mt, to meet growing demand. One of the proposed factories – North-West Fertilizer Factory Ltd. – would be set up in Sirajganj on the northwestern side under the financing of China, while the other – Shahjalal Fertilizer Factory Ltd. – will be set up to replace the Natural Gas Fertilizer Factory (NGFF) Ltd. in Fenchuganj, on the northeastern side of the country, with possible financial assistance from the Czech Republic.
The Bangladesh Monitoring Committee on Fertilizer has set an import target of 1.1 million mt of urea for the current fiscal year to meet its growing demand and tide over a possible shortfall in domestic production. Local media pointed out that the urea production target is unlikely to be achieved this fiscal year due to the closure of the Ghorashal Fertilizer Factory. The country’s total urea output may decline by 0.2 million mt to 1.17 million mt, while the demand for the item has been projected at 2.8 million mt in fiscal 2007-08. In the last fiscal year, the government imported about 0.82 million mt of urea against the target of 0.9 million mt.
Randy Tauscher joined Martin Resource Management Corp. as executive vice president, effective Sept. 1. He will be responsible for management of the Martin Sulphur division, as well as business development for dry bulk commodities. Prior to joining Martin, he was employed with Koch Industries for 18 years in various trading and management positions in sulfur products, gas liquids, petroleum coke, and ocean freight. His office will be in Wichita, Kan., and he can be contacted at 903-983-5190 or rtauscher@martinmlp.com.
In conjunction with Tauscher’s hiring, Dick Wilkinson will transition into a new role as vice president ?Çô Martin Integrated Sulfur Systems. Martin Integrated Sulfur Systems was recently formed to design and build customized integrated sulfur handling systems.
Cheryl Schmura, CHS vice president, crop nutrients, announced Sept. 11 that Jeff Greseth has agreed to join the senior leadership team as director, sales. He joined the cooperative system in 1979 and has varied experience in sales, facility management, marketing, supply management across many product lines, and manufacturing. He led Omnium LLC as its president and CEO for four years. He most recently served as Agriliance urea product manager, where he successfully negotiated international supply contracts and was responsible for overall urea sales and profitability.
Greseth will report directly to Schmura. The sales organization will report to Greseth, with the current reporting unchanged. In addition, he will continue to oversee urea product management until a replacement is announced.
Greseth’s appointment now completes the CN leadership team. Other members include: Tim Chrislip, director, product management; Cathy Eckman, director, operations; and Dave Klima, director, facilities.
John Ringkob has been elected vice-president and a director of Dasco Inc., Monument, Colo. He has been Dasco Midwest sales manager for the past three years, and recently purchased an equity position in the company.
Shrieve Chemical Co. has announced the promotion of Jack Weaverling to senior vice president. He has been with Shrieve for 18 years, and will continue his duties in sulfur products with additional focus on business development.
Tessenderlo Kerley Inc. announced Sept. 12 that Tom Fairweather has been promoted to the position of director of agronomy, replacing Dr. John Clapp, who recently retired. Fairweather, a K-State graduate with an MS in Agronomy, has been with TKI for 12 years as a staff agronomist, focusing on the company’s specialty fertilizer products. He resides in Dundee, Oregon, and may be contacted at tfairweather@tkinet.com.
Leon Stites has joined TKI’s agronomy group as a staff agronomist. He holds a BS and MS in Agronomy from K-State and has worked for Sandoz for 15 years. He was most recently with the Kansas Cooperative Extension Service. He is based in Kansas City, Mo., and may be contacted at lstites@tkinet.com.
The TKI NovaSource division has hired Rita McDannald as sales service manager. She will be based in the Phoenix office and will have customer service and administrative responsibilities. She was most recently with BASF for ten years.
Bob Gestring has also joined TKI NovaSource as Midwest regional account manager. He was formerly with Albaugh Inc., where he spent five years as Midwest/Northeast sales manager. He has also worked for Monsanto Chemical and Ciba Geigy/Norvartis. Gestring will remain in Ankeny, Iowa, and can be reached at bgestring@tkinet.com or 515-965-8703.
Both McDannald and Gestring will report to David Cassidy, group vice president, NovaSource. NovaSource develops and markets EPA-registered pesticides for niche crop protection and specialty markets within TKI.
Daniel Clauw, who came to Yara International ASA (then Hydro Agri) as a successful private entrepreneur in 1996, will now leave the company to pursue other business interests, according to Yara. He has held several senior positions with Yara and was instrumental during a demanding turnaround process in 1999; he was also an architect of Yara’s growth strategy, including the announced tender offer for Kemira GrowHow. Since August 2006 he has functioned as an internal consultant at Yara; he stepped down from all of his responsibilities Sept. 1.
Sioux City-Terra Industries Inc. and Kemira GrowHow Oyj on Sept. 14 confirmed the formation of a joint venture company, GrowHow UK Ltd., combining their fertilizer and associated process chemicals businesses in the United Kingdom and the Republic of Ireland. Completion of the joint venture follows confirmation from the UK Competition Commission that it has concluded its review and approved the transaction. The move is designed to secure a sustainable, long-term base for manufacturing fertilizer and process chemicals in the UK. The combined business will produce ammonium nitrate, which is the main nitrogen fertilizer consumed in the UK, as well as compound fertilizers to service both the UK and Ireland markets. GrowHow UK Limited will be owned 50/50 by Kemira GrowHow and Terra, and will include Kemira GrowHow’s site at Ince and Terra’s sites on Teesside and Severnside. The annual turnover of the operations included in the joint venture exceeded 500 million euros in 2006. Through the joint venture, Kemira GrowHow and Terra expect to create significant cost and operational synergies to enhance their ability to service and compete in increasingly challenging markets. Kemira GrowHow UK Limited is the largest UK producer of compound fertilizers, and Terra Nitrogen (UK) Limited is the largest UK producer of ammonium nitrate.
Algona, Iowa-Hydrogen Engine Center Inc. has completed and shipped its first anhydrous ammonia-powered irrigation pump for field testing in California, where the state is requiring that such machinery be converted to non-polluting fuels by 2010, according to HEC officials. The engine will be operated primarily on anhydrous, using liquefied petroleum gas as a catalyst fuel to irrigate a walnut grove and provide water for a cattle ranch in the San Luis Obispo area. “We are pleased that, in a relatively short period of time, we have developed the technology to a point where we are ready to begin full field trials,” CEO Ted Hollinger he said. “We believe that implementing ammonia as a carbonless fuel with our Oxx Power products will open new markets that have been dominated by fossil fuel powered engines for decades.”
Tallahassee-The Urban Turf Fertilizer Rule adopted last month to reduce the amount of nitrogen and phosphorus used on turfgrass will not preempt local ordinances, according to state agriculture and consumer service officials. The rule, designed to reduce fertilizer runoff into the state’s waterways, has the support of environmental and water conservation interests. Counties, some of which already have their own fertilizer restrictions, won’t be legally prohibited from regulating what’s in the fertilizer bag, which is what the statewide rule establishes, Agriculture and Consumer Services spokesman Terry McElroy told Green Markets. “But local law that deviates from the statewide rule will be very difficult to enforce,” McElroy added, “and it will be virtually impossible to find a commercial fertilizer product in the marketplace that would comply with a more restrictive rule than the one adopted by the state.” McElroy said the state hopes – and believes – that local governments that enact such laws in the future will focus on non-formulation issues, including mandatory training for commercial lawn maintenance personnel and regulations establishing how close to water bodies fertilizer can be applied. Meanwhile, The Fertilizer Institute is warning that Florida’s rule calling for reductions in nitrogen between 20 and 25 percent and phosphorus by 15 percent is too low. TFI spokeswoman Kathy Mathers commented, “We believe that the nitrogen recommendations in particular are too low to sustain healthy turf and think that the potentially beneficial role for enhanced efficiency fertilizer products was not taken into consideration in the final rule.”
Washington-It’s high time for Congress to require more environmental protection from soil erosion and fertilizer and pesticide runoff in exchange for costly farm subsidies, according to a report from the Environmental Working Group. As nearly 75 percent of farmer requests for voluntary conservation assistance go unfunded and soil erosion rules for subsidy recipients are barely enforced, EWG charges, 1.7 billion tons of topsoil erodes off agricultural fields nationwide, polluting America’s waters and fisheries with sediment and millions of pounds of fertilizer and pesticides. While USDA estimates soil erosion is down 40 percent since 1985, due partly to conservation compliance, the report Trouble Downstream: Upgrading Conservation Compliance singles out a number of factors – including poor enforcement and woefully inadequate conservation compliance – that must be updated to solve the nation’s water quality problems. EWG attributes the massive and chronic water pollution “Dead Zone” problem in the Gulf of Mexico to lavish subsidies for large farmers, combined with slack compliance enforcement and significant under-funding of voluntary cost-share conservation programs. Even more disturbing, EWG charges, taxpayer dollars in the form of federal farm subsidies to commodity crop producers that are heavy users of fertilizer are contributing to this environmental catastrophe. The problem could worsen with the rapidly expanding production of corn and other crops as a result of the biofuels boom. Furthermore, conservation compliance singularly focuses on soil erosion, while much of today’s agricultural-environmental challenges involve fertilizer pollution, which is not managed by conservation compliance. “It makes sense to expect that taxpayer dollars spent supporting crop production does not result in soil erosion or fertilizer pollution of our nation’s waters. It’s high time for Congress to require more environmental protection in exchange for farm subsidies, especially now, when budgets are tight, and there isn’t enough money to solve problems with the conventional voluntary cost-share approach,” says Michelle Perez, senior analyst and primary author of the EWG report. Responding on behalf of the industry, TFI cited its strong advocacy of farmers having a written nutrient management plan that takes into account both fertilizer use and the nutrient content of any animal manure used. “There is a national network of Certified Crop Advisers (https://www.agronomy.org/cca/) available to help farmers in these efforts, and we encourage the use of these trained individuals for this purpose,” reported spokeswoman Kathy Mathers.
The recent flood at Coffeyville Resources is expected to cost approximately $125 million once all the variables are added together, according to a recent filing with the SEC. The company detailed the impact of the June 30/July 1 flood on its facilities in Coffeyville, Kan., saying actual physical damage to facility should have a third party cost of approximately $85 million. Of this, only $4 million is attributed to the nitrogen plant, while $81 million is for the oil refinery.
The river crested more than 10 feet above flood stage, setting a new record for the river. Approximately 2,000 citizens and more than 300 homes were affected. Nearly 1,000 extra contract workers were hired to help repair and replace damaged equipment at the refinery. Substantially all units at the refinery were back up by Aug. 20. The nitrogen plant initiated startup on July 13.
Coffeyville said its employees had to shut down and secure the refinery in six to seven hours, rather than the 24 hours typically needed to do so. It estimates that 1,919 barrels (80,600 gallons) of crude oil and 226 barrels of crude oil fractions were discharged from the refinery into the Verdigris River.
The majority of the refinery’s process units were under four-to-six feet of water, and portions of the refinery’s tank farms and wastewater treatment area were covered with eight-to-ten feet of water. As a result, both the refinery and nitrogen plant sustained major damage and required extensive repairs.
The refinery sustained damage to a large number of pumps, motors, tanks, control rooms and other buildings, electrical equipment, and electronic controls, and required significant clean-up in areas surrounding the water and wastewater treatment plants.
The nitrogen plant, situated on slightly higher ground, sustained less damage than the refinery. Bringing the nitrogen plant back online involved replacing or repairing 30 percent of all electric drives, repairing 60 percent of the plant’s motor control centers, refurbishing 100 percent of distributive control systems and programmable logic controllers, and repairing the main control room.
On July 10, Coffeyville entered into a consent order with the U.S. Environmental Protection Agency. The company agreed to perform specified remedial actions to respond to the discharge. The company said it has worked with EPA throughout and noted that it may be required to reimburse EPA’s costs under the federal Oil Pollution Act. It expects remediation to continue through December 2007.
Coffeyville estimates the total costs of oil remediation will be between $7-$10 million. Resolution of third-party property damage claims is estimated to cost $25-$30 million. As a result, the total is expected to be $32-$40 million. This does not include possible fines or costs from class action lawsuits.
On July 19, Coffeyville began a program to purchase approximately 380 homes and certain other properties impacted by the flood and the oil discharge. It offered to purchase the property of approximately 330 residential landowners for 110 percent of their pre-flood appraised value without release or other waiver of any rights by the landowners, and without deduction for the greater harm caused to these properties by the flood itself. It estimates that this program will cost approximately $16 million, excluding certain costs associated with remediation.
It also noted that two class action suits have been filed, one in federal and one in state court. It plans to vigorously defend both and doesn’t believe the resolution of either will have a significant adverse effect on business.
Coffeyville gave more insight into its insurance. It believes that its property insurance should cover substantially all of the estimated physical damage to the property, noting that insurers have cited potential coverage limitations and defenses. The company expects the matter will eventually be settled by negotiation or litigation. While the company had business interruption insurance, there was a 45-day waiting period for business interruption loss. However, both plants came back up within that period.
In addition, Coffeyville has another $50 million in environmental liability insurance and $100 million in umbrella insurance, both with limitations and deductibles.
Coffeyville maintains property damage insurance, which includes damage caused by a flood of up to $300 million per occurrence, subject to deductibles and other limitations. The deductible for property damage is $2.5 million.
Going forward, Coffeyville says the flood and crude oil discharge will have a significant adverse impact on third quarter 2007 results. It expects reduced revenue due to the closure of its facilities, as well as significant costs related to the flood as a result of the necessary repairs to the facilities and environmental remediation.
For the first half ending June 30, 2007, Coffeyville results include pretax costs of $2.1 million associated with the flood, primarily including write-offs of property and inventories that are uninsured due to insurance deductibles. Additional costs will be recorded in future periods as they are increased, primarily related to the repair and clean-up efforts.
First-half earnings saw another kind of flood – one of red ink from $292.4 million in derivative losses. Year-ago derivative losses were $126.5 million. First-quarter 2007 derivative losses were $137.0 million, versus the year-ago $17.6 million (GM June 25, p. 15). Coffeyville said the derivative losses were primarily attributable to its cash flow swap and the accounting treatment for all derivative transactions.
The increasing derivative losses, along with a first-quarter turnaround and a decline in petroleum and nitrogen results, caused a company-wide net loss of $54.3 million on sales of $1.23 billion for the first half, versus the year-ago net income of $41.8 million and sales of $1.55 billion. Current operating income was also off, at $123.8 million from the year-ago $214.9 million.
Company-wide net earnings for the calendar year ending Dec. 31, 2006, were $191.6 million on sales of $3.04 billion.
Petroleum operating income was down, at $102.9 million on sales of $1.16 billion, versus the year-ago $178.0 million and $1.46 billion, respectively.
Nitrogen operating income was $21.0 million on sales of $74.3 million for the six months ending June 30, 2007, versus the year-ago $37.1 million and $95.6 million. For the year ending Dec. 31, 2006, operating income was $36.8 million on sales of $162.5 million.
First-half ammonia production was off as well, with 169,000 st produced, down from 205,600 st. UAN production was 304,600 st, down from 328,300 st. For the year ending Dec. 31, 2006, the company produced 369,300 st of ammonia and 633,100 st of UAN.
First-half ammonia sales were 34,100 st at an average price of $354/st FOB, versus the year-ago 66,300 st and $376/st. UAN sales were 293,500 st at $190/st, versus the year-ago 339,300 st and $181/st, respectively.
Ammonia prices were off 6 percent, while UAN prices were up 5 percent. Coffeyville noted that year-ago fertilizer prices benefited from higher natural gas prices resulting from Hurricanes Katrina and Rita, as much product is sold on forward contracts.
Overall for nitrogen, decreased operating income resulted from reduced sales volumes, partially offset by higher plant gate prices and increased direct operating expenses – primarily the result of increases in labor, repair and maintenance, equipment rental, outside services, utilities, and insurance. The increase in repairs and maintenance was specifically related to preventative maintenance performed during a two-day air separation unit outage and repairs to the nitric acid plant during the past six months.
Coffeyville is still considering a $40 million expansion that would increase UAN capacity by 50 percent, to 1 million st.
Despite lower production in the first half, the company noted that overall its capacity utilization has been up in the past three years. For 2002-2004 the gasifier, ammonia, and UAN capacity was 87, 75.5, and 89.9 percent, respectively. For 2005-June 2007, it was 94.4, 94.9, and 117.2 percent, respectively. However, for the first half it was off, at 90.6, 84.9, and 112.2 percent, versus the year-ago 97.3, 103.2, and 120.9 percent.
For the calendar years 2005 and 2006, as well as the first six months of 2007, the top five ammonia customers represented 55.2, 51.9, and 74.3 percent of ammonia sales, while the top five UAN customers represented 43.1, 30.0, and 38.8 percent. During the first six months of 2007, the top two ammonia buyers were Brandt Consolidated Inc. at 20.1 percent and MFA Inc. at 20.8 percent, while the top UAN buyers were ConAgra Fertilizer at 19.5 percent and Interchem at 8.6 percent. For the year ending Dec. 31, 2006, Brandt and MFA accounted for 22.2 and 13.1 percent of ammonia purchases, while ConAgra and Agriliance accounted for 8.4 and 6.3 percent of UAN.
In the meantime, the owners of Coffeyville are in the midst of an IPO to sell $375 million shares of the company under the name CVR Energy Inc., based in Woodland, Texas (GM May 21, 2007, p. 1).
As for June 30, 2007, Coffeyville had $773.1 million in term loans and $150 million in funded letters of credit outstanding under its credit facility and availability of $76.2 million under revolving credit facility. In August, company subsidiaries entered into three additional credit facilities: a $25 million secured term facility and a $25 million unsecured term facility, both of which are fully drawn, and a $75 million unsecured facility, of which none was outstanding as of Aug. 31, 2007.
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All information has been obtained by Green Markets from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, Green Markets or others, Green Markets does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.
