The industry marked the anniversary of 9/11 last week at TFI’s World Conference, held in San Francisco. Potash Corp. of Saskatchewan Inc. President and CEO Bill Doyle noted that 9/11 occurred five years ago during TFI’s World Conference in Chicago (GM Sept. 17, 2001, p. 1). The 2001 conference, with an attendance of around 800, was canceled that day, leaving North American attendees scrambling to find a way home and overseas players stranded.
Keynote speaker General Hugh Shelton was the chairman of the Joint Chiefs of Staff from 1997-2001, including the day of 9/11. Shelton, the recipient of the Congressional Gold Medal, assessed potential terror threats around the world, and noted that former nuclear scientists in Russia made less than the doorman of the Westin St. Francis. He said there is still distrust of the U.S. in Russia, and that we must work to assure good relations so as not to develop another Cold War.
Shelton said China can catch up on military technology by simply purchasing it off the shelf. He noted joint China-Russia military exercises as a concern.
Indonesia, after years of a bad government, is in danger of disintegrating. U.S. support of the government fomented anti-U.S. sentiments. Shelton is concerned that this country – the largest Muslim nation, with the world’s fourth largest population – may become a safe haven for al Qaeda.
In the Mideast, Shelton said the old adage about a good offense being the best defense is correct. He said the U.S. should have acted more aggressively after the attacks on the USS Cole and on U.S. Embassies abroad, which occurred prior to 9/11.
Currently, he said Iran is thumbing its nose at the U.S. and the United Nations.
As for the current war, he said the U.S. has only the 7th or 8th largest army in the world and is not keeping up the way it should. He added that equipment is quickly wearing out in Iraq and Afghanistan.
As for the Israeli/Arab peace process, he said we should exert more pressure for a balance between Israel and the Palestinians, as opposed to appearing so pro-Israel.
Attendance at this year’s conference was over 650, meeting TFI expectations, though down a little from the year-ago meeting in Toronto, where some 700 attended.
What a difference a year makes. Just a year ago the fertilizer industry was reeling under high natural gas costs brought on by Hurricane Katrina. Year-ago Henry Hub October prices were $11.336/mmBtu. On Thursday, Sept. 14, October closed on NYMEX at $4.892/mmBtu, a two-year low. November and December were $6.407/mmBtu and $8.047/mmBtu, respectively.
The impact of lower gas prices has been a major topic of conversation in recent weeks, including at the TFI World Conference in San Francisco last week. Last year, North American producers hardly knew from one week until the next whether high gas costs would allow them to produce. After Katrina, high gas prices continued through the rest of 2005 and did not start to significantly ease until the markets saw a warm winter in early 2006. Low prices now should allow domestic producers to run at full capacity into the spring – assuming no major weather changes, such as another hurricane or a cold winter.
So far in 2006, the weather has been on the side of domestic nitrogen producers. The National Oceanic and Atmospheric Administration reports that the period from January-August 2006 is the warmest on record in the continental U.S. This is tempered by NOAA’s additional findings that 40 percent of the country has moderate-to-extreme drought conditions, a factor that would significantly impact agriculture. Above-average rainfall in August helped ease drought conditions in some of the most severely affected states, including parts of Oklahoma, the Dakotas, Texas, Arizona, and New Mexico.
NOAA also said last week that the development of El Nino conditions helped explain the absence of Caribbean hurricanes this year. NOAA says El Nino normally suppresses hurricane activity by increasing vertical wind shear over the Caribbean.
NOAA said typical El Nino effects are likely to develop over North America this upcoming winter. This includes warmer-than-average temperatures over western and eastern Canada and the western and northern U.S. Wetter-than-average conditions are likely over portions of the U.S. Gulf Coast and Florida, while drier-than-average conditions can be expected in the Ohio Valley and the Pacific Northwest.
In the meantime, while not giving up the fight, industry associations said last week that time is running out for the passage of Outer Continental Shelf bills to spur increased drilling. TFI spokesperson Harriet Wegmeyer said that since there are only a few days left to the legislative calendar before elections, it is extremely doubtful that anything will move. At this point, the House and Senate just can’t agree on the bills – it’s just that simple, she said. The oil industry’s recent discovery of an impressive offshore field is not expected to have any impact on the OCS bills, she added.
Still, TFI had not completely given up. It made an appeal last week for quick reconciliation and passage of the HR4761 Deep Ocean Energy and Resources Act and S3711 Gulf of Mexico Energy Security Act. In a letter to the House and Senate leadership, TFI President Ford West declared, “It is critical for our industry and our farmer customers for the 109th Congress to enact measures to increase natural gas supplies.” He said HR4761 lifts an outdated 25-year-old moratorium on exploration for natural gas in waters within the jurisdiction of the United States, while S3711 expands natural gas exploration and drilling in the Gulf of Mexico by offering leases in these currently restricted areas.
ARA’s Richard Gupton is still hopeful an energy bill can get passed before Congress leaves to campaign at the end of this month. “However, given the current political atmosphere and strong opposition from environmental groups, it is likely going to be difficult to get anything done on this issue prior to the November elections.” On Sept. 8 Rep. John Peterson (R-Pa.) wrote President Bush to throw his weight behind the more far-reaching House approach. Peterson asserted that the Senate bill “which elicited a much more favorable response from your office” would allow only a small portion of the Gulf of Mexico to be leased, while the House bill makes available 15 times as much oil and nearly 18 times as much natural gas.
The five-year anniversary of the 9/11 terrorist attacks figured prominently in the news last week, along with numerous observations of how our lives have changed as a result of heightened security concerns, both in the immediate days after the attacks and in the years since.
This is true for the fertilizer industry as well, which has faced new regulations regarding the handling and storage of some products, and has implemented its own code of practices to beef up security at all stages of the distribution chain. Security awareness has also prompted lawmakers to push for worker identification standards and chemical site security legislation that will figure prominently in how fertilizer companies do business going forward.
In the weeks following 9/11, the fertilizer and ag chem industries were the focus of high level investigations, fueled by the reality that at least one of the 9/11 conspirators had repeatedly visited a crop dusting firm in Florida and tried to get a loan to buy an airplane, allegedly to carry out some type of chemical attack (GM Oct. 1, 2001). That information, as well as the paranoia-fueled reports of crop dusters dousing a towboat on the Mississippi River and a Coast Guard station in Natchez, Miss., (GM Nov. 12, 2001), resulted in crop dusters being grounded on separate occasions during the fall of 2001.
The attacks also put an immediate imprint on attendance at subsequent conferences as companies canceled travel plans. This resulted in significant drops in registrants for the Fertilizer Roundtable Conference and other events in the fall and winter of 2001.
TFI, the Agricultural Retailers Association, and numerous state associations started security task forces in the months following the attacks, and within a year the U.S. Department of Justice and EPA had released guidelines for chemical facilities to conduct vulnerability assessments and implement safeguards (GM June 24, 2002). TFI published its Security Code of Management Practices, ARA released a security checklist for members, and an online vulnerability assessment sponsored by ARA, TFI, and CropLife America became available in spring 2003 (GM May 12, 2003). In early 2005, Asmark Inc., a provider of risk management services and regulatory compliance products, announced that it was forming a new organization to assist retailers with state and federal compliance issues (GM Jan. 24, 2005).
Ammonium nitrate thefts, both real and imagined, became national news after 9/11, and various news organizations conducted stings of fertilizer retailers to illustrate the ease of purchasing AN in quantities suitable for bomb-making. This gave the industry a black eye in some cases (GM Nov. 22, 2004), but also prompted overzealous reporters to mistakenly target dealers for lax AN security (GM Dec. 20, 2004). Public confusion about which fertilizers constitute an explosive risk still exists; the controversial ABC miniseries “The Path to 9/11,” which aired Sept. 10-11, depicts a scene in which a U.S./Canada border guard finds bags of AN in the trunk of car and refers to the product as “urea.”
Dealers and distributors began backing away from AN even as op-ed columnists in prominent newspapers began calling for AN bans in the U.S. (GM May 17, 2004). In July 2004, TFI announced that it was joining the Bureau of Alcohol, Tobacco, Firearms and Explosives and the Association of American Plant Food Control Officials to launch “America’s Security Begins with You,” a campaign to secure AN against criminal misuse (GM July 19, 2004). In June 2005, the Canadian Fertilizer Institute unveiled its own AN security program, called “On Guard for Canada” (GM June 20, 2005).
Despite those efforts, the burdensome and costly Coast Guard security regulations for AN, implemented in July of 2004 as part of the 2002 Maritime Transportation Security Act (GM Oct. 11, 2004), ultimately drove several barge lines and distributors to stop carrying the product. In January 2005, the J.R. Simplot Co. informed wholesale and retail customers that it would stop selling fertilizer-grade AN after the spring 2005 season (GM Jan. 31, 2005), and in June of that year, Agrium Inc. announced that it would discontinue the production and sale of fertilizer-grade AN (GM July 4, 2005). Effective Dec. 31 of last year, Wilbur-Ellis Co. also stopped distributing AN in the U.S. (GM Aug. 8, 2005). With the departure of Air Products and Chemicals Inc. from the AN market late last year (GM Jan. 2, p. 1), the only two remaining AN producers in the U.S. are Terra Industries Inc. and El Dorado Chemical Co.
Also since 9/11, TFI, ARA, and other associations have been engaged in an ongoing discussion with lawmakers about chemical site security. The industry first came up against a Senate bill in the summer of 2002, called the “Chemical Security Act,” that proposed aggressive measures to monitor chemical site security, including giving EPA authority to enter premises and copy records (GM Aug. 5, 2002). That bill, along with other early efforts at broad-based and layered security regulations sponsored by then Sen. Jon Corzine (D-N.J.), drew heated opposition from the fertilizer and ag chemical industries (GM Sept. 9, 2002), who argued that the industry had already taken significant voluntary steps to reduce vulnerabilities, and that security enforcement belonged under the jurisdiction of the Department of Homeland Security and not with EPA or other agencies. The industry also opposes mandates requiring the use of inherently safer technologies at chemical facilities.
According to ARA, House and Senate Republican leaders are considering attaching chemical site security legislation to the FY 2007 Department of Homeland Security (DHS) Appropriations bill if the authorizing committees can reach agreement on the measure. House Homeland Security Committee Chairman Pete King (R-NY) indicated he would like to complete this legislation this month, and is working with Senate Homeland Security and Governmental Affairs Committee Chairman Susan Collins (R-ME) to reconcile differences in the bill. The target date to wrap up negotiations on the homeland security spending bill is Sept. 21, ARA said.
In addition, legislators are considering nationwide AN sales tracking regulations (GM June 19, p. 1), a measure that TFI, Terra Industries, and other trade groups support. The Secure Handling of Ammonium Nitrate Act of 2006, which received House Homeland Security Committee approval in June, directs DHS to promulgate regulations requiring registration of all facilities that sell AN fertilizer and record-keeping on all purchases of the product.
As recently as Sept. 12, it was reported that New York City police investigators posing as apple growers had purchased more than 1,000 pounds of AN in 2004 from agricultural supply outlets in Schaghticoke, N.Y., and Yardley, Pa., and then constructed a 2,400-pound truck bomb using instructions posted on the Internet. In testimony before the Senate committee on Homeland Security, Police Commissioner Raymond Kelly said the operation “demonstrated that safeguards are needed to make it harder to acquire bomb-building material and easier to regulate and track their sales.”
It was also noted, however, that the New York retailer involved in the sting had reportedly become suspicious and notified federal authorities, who learned about the undercover operation while trying to do a background check on the purchasers.
Sacramento-Based on random samples of about 2,330 fertilizer products in California from Jan. 1, 2002, to Dec. 31, 2005, the California Department of Food and Agriculture (CDFA) reported that California’s fertilizer industry managed a near-perfect record of compliance with strict heavy metals content regulations in the state. From the 2,330 fertilizer materials, CDFA analyzed 605 samples for heavy metals and found only six cases, the agency reported. The result, which represented less than one percent of analyzed samples, exceeds the state’s regulatory limits for at least one metal, CDFA reported. “The fact that there was only a small fraction of violations cited by CDFA in more than 600 samples is a very good indicator that the industry is closely following the rules,” Renee Pinel, president and CEO of Western Plant Health Association, was quoted as saying. “The CDFA’s latest sampling suggests that fertilizer companies throughout California are doing everything in their power to protect public health from concerns raised related to heavy metal in fertilizer.” The fertilizer heavy metals standards in California, now four years old and considered the most restrictive in the world, require commercial fertilizer manufacturers selling products in California to ensure that products do not exceed certain levels for lead, arsenic, and cadmium. Manufacturers are also required to document whether their products contained recycled materials.
Washington, D.C.-According to USDA’s latest crop production report, released Sept. 12 by the National Agricultural Statistics Service, corn production in the U.S. is forecast at 11.1 billion bushels, up 1 percent from last month and fractionally above 2005. Based on conditions as of Sept. 1, yields are expected to average 154.7 bushels/acre, up 2.5 bushels from August and 6.8 bushels from last year. USDA attributed the increase to improved soil moisture levels and crop conditions in the northern Great Plains and western Cornbelt. If realized, yield and production would be the second largest on record, trailing only 2004, USDA said. U.S. soybean production is forecast at 3.09 billion bushels, up 6 percent from the August forecast and up slightly from the 2005 crop. If realized, this would be the second highest production on record, USDA said. Based on Sept. 1 conditions, USDA said soybean yields are expected to average 41.8 bu/a, up 2.2 bushels from August, but down 1.5 bushels from last year’s record high yield. USDA estimated the 2006 U.S. cotton crop at 20.3 million 480-pound bales, down slightly from last month and down 15 percent from last year’s record high production. Cotton yields are expected to average 762 pounds/acre, down 3 pounds from last month and down 69 pounds from last year.
Washington-The Agricultural Retailers Association and The Fertilizer Institute testified on Sept. 13 before the House Agriculture Committee on current farm bill policy. The Senate and House Agriculture Committees have been holding hearings in preparation for crafting the 2007 Farm Bill. The current farm bill, written and signed into law in 2002, is set to expire next year. ARA, represented by Dennis Craig of W.B. Johnston Grain Company in Enid, Okla., highlighted the ag retail and distribution industry’s recommendations for farm bill policy improvements, such as conservation and environmental stewardship programs, the value of technical service providers in delivering products to farmer customers, and the importance of uniform pesticide applicator standards. ARA is also recommending that the 2007 farm bill include language that promotes the increased production of biofuels and the development of private-public research on the economic impact of the changing transportation systems, and proposes an increase in the hours of service agricultural exemption from 100 to 150 miles. Representing TFI, Alex McGregor, TFI board member and president of The McGregor Company in Colfax, Wash., cited passing energy legislation, enhancing emergency disaster assistance, fully funding agriculture conservation programs, and strengthening federal farm safety nets as key to the new farm bill. “While there are many strengths in the current farm bill…the lack of an effective safety net to cushion through down cycles has meant that record numbers of producers are falling through holes in the netting and drowning in red ink or bailing out before they lose the last of their equity,” McGregor said.
Keith Satchwell, long-time managing director of Australia Fertilizers and a prominent player in the international fertilizer business, unexpectedly passed away Sept. 10 in Australia. Though retired for many years, friends said he maintained an avid interest and communication with present day leaders in the industry. More details were not immediately available.
Agrium Inc. reports that the Honorable Anne McLellan, P.C., has agreed to join the company’s board of directors. Ms. McLellan has over 30 years of political, policy making, and legal experience. She was a Member of Parliament from 1993-2006, serving as deputy prime minister from 2003-2006.
Russell Girling also recently joined the Agrium board. Girling has over 20 years of business experience and currently is president, Pipelines, for TransCanada Corp., responsible for TransCanada’s regulated businesses in Canada, the U.S., and Mexico. He is also chairman, president, and CEO of TC Pipelines LP.
U.S. Gulf/Tampa: Major players concluded second half September Tampa business at $293/mt DEL last week. Those new numbers are in line with the most recent product into Point Comfort. In the meantime, while recent quotes for NOLA have been within the $280-$285/st FOB range, the free-fall in gas prices now has some doubting those numbers will be achieved in the near term. Sources did report that more recent trades did reach the $280/st FOB mark.
Eastern Cornbelt: Sources reported little change in the spot fertilizer markets last week, although there was some product positioning taking place before the fall application season. Ammonia was commonly quoted at $355-$365/st FOB regional terminals, with the low in Illinois.
Western Cornbelt: Anhydrous ammonia remained at $350-$360/st FOB most regional terminals. Several sources said they expect good fall ammonia movement, and noted that some terminals were low on product. There were reports that Koch’s terminal at Enid, Okla., was sold out of ammonia last week.
Northern Plains: Several sources said they expect brisk fall ammonia movement in the region. The ammonia market was quoted at $335-$350/st FOB regional terminals, and $355-$365/st DEL in North Dakota. Dakota Gasification was reportedly planning to restart its Beulah, N.D., ammonia plant on Sept. 15 after some downtime to balance inventories and perform boiler maintenance.
Great Lakes: The anhydrous ammonia market was pegged at $355-$370/st FOB in the region, with the lower numbers reported in southern Wisconsin.
India: The industry is looking to the prices coming out of the PPL tender to help better gauge where the global market – especially the Middle East market – will go.
For now, sources say best guesses put the offers into the tender at $280/mt CFR, which translates to $230-$240/mt FOB. With freight rates remaining high, the lower number is being used as a working estimate until the deal is consummated.
Previous business to India put the market at $240/mt FOB. Buying is expected to pick up, say Asian sources, as IFFCO steps up its production and hence its demand for more ammonia.
The issue now is that with rising freight rates, a strong desire by buyers to hold the line, strong desires by producers to increase their netbacks, and low Middle East inventories, sources say all indicators point to higher prices for Indian buyers.
By Sept. 18, the results of the tender should be known. Sources in Asia expect to see some bargaining going on between the buyer and offering companies. Just how much room PPL will have to negotiate is not clear. Observers point to the limited stockpiles in the Middle East as a major mark against any serious price decrease.
Middle East: In all likelihood, a Middle East supplier will get the PPL/India business. As of press time the best guess from Asian sources put the offering prices at $280/mt FOB. Once freight of $50/mt is backed off, sources say the Middle East could see a change in prices around $230/mt FOB.
The market has had its share of ups and downs in the past 90 days. Just late last month a deal with Pardeep/India shot the price up to $245/mt FOB. At that time sources said the price could continue to climb, but instead it stealthily moved downward to contracted ton levels. With no other spot business to judge the strength or weakness of the market, sources looked to the next set of Indian business. The PPL tender is what they are looking for.
For Asian buyers, the apparent move to $230/mt FOB is a slight relief. They are happy the PPL tender will apparently move the Middle East market closer to early August levels. They are worried because the estimated level is still higher than what was last reported before the Pardeep business.
Adding to buyers’ woes are reports the U.S. buyers will be active for the next few months. And while most of the tons America will buy will come from Yuzhnyy, there is expected to be a healthy amount taken from this region as well. Come Jan. 1 the price should drop off, unless there is a major disruption in the U.S. ammonia production facilities.
Black Sea: Asian sources point to reports the U.S. will soon be heavily in the market. Sellers are reportedly talking $295/mt CFR for a netback in the upper $220s/mt FOB. At least one deal has been concluded at $293/mt CFR, say sources.
For now, however, Asian sources are pegging the market at $220-$225/mt FOB.
To add to the general bullish feeling, sources say European buyers will continue to need tons because the cost of producing their own material is too expensive. High input costs – especially on natural gas – are causing most plant operators to shut down.
At the same time, there are turnarounds taking place in Ukraine and Algeria, thus making the availability of tons for European buyers in particular that much more limited.
And lastly, there are reports circulating that natural gas prices to Ukrainian producers will jump at the beginning of the year. Some buyers are expected to try to snap up as many reserve tons as they can prior to the New Year. One observer noted buyers do not want to be in a position similar to what happened earlier this year, when natural gas prices were raised and there was a stalemate between gas suppliers and buyers. The uncertainty of the plants’ ability to operate boosted the ammonia price at that time.
Asia: Regional buyers are expecting to see prices rise as the year wanes. The one hope is that once the end-of-year buying is done, January and February might herald lower prices. Demand in Taiwan remains firm. Sources say it could be higher, but at least one major buyer is down because of a strike. Other major buyers, such as CPDC and Taiwan Fertilizer, are still planning on taking their usual amounts.
In Indonesia, the KPA plant is expected to come back on line this week. Full production is not expected until Sept. 25, however.
The plant was down for a routine turnaround.
UREA
U.S. Gulf: Into mid-day Thursday, most folks called the NOLA barge market quiet. While many saw no major changes to the market, others reported new business was topping out at $226/st FOB.
On Thursday, gas prices took a dive (See page 1). There were reports that at least one major domestic producer significantly adjusted its forward pricing on urea and UAN to reflect these lower prices, significantly impacting prompt barge price ideas. Sources said barges were being offered late in the week as low as $220/st FOB. October was reportedly being quoted as low as $210/st FOB.
The low gas prices appear to be having a positive impact for both domestic producers and buyers. Producers can drop their prices, assure full production, and make it hard on importers. Sources said last week that the world urea market is already $20/st above the NOLA market, making it very difficult to justify any new spot cargoes to come to NOLA. Domestic buyers obviously benefit due to the price cut. Still, even at lower prices now, buyers may not see much need to buy if they do not need product until spring.
Eastern Cornbelt: Granular urea was $260/st FOB most river terminals in the region, while dealer postings were up at the $275/st FOB and $280/st DEL levels from Agrium.
Western Cornbelt: Granular urea remained at $255-$260/st FOB river terminals, with inland postings as high as $285/st FOB.
Northern Plains: Granular urea was $250-$260/st FOB, with the low at Minneapolis, Minn., and the high at Carrington, N.D. Reference pricing was quoted as high as $270/st FOB the Twin Cities. Delivered urea in North Dakota was pegged at $265/st last week, with reports of tight supplies out of Canada.
Great Lakes: Granular urea was $265-$280/st FOB, with the upper end reflecting dealer reference pricing in Michigan from several suppliers. A southern Wisconsin source pegged the truck-delivered urea market at the $265-$270/st range last week. Agrium’s Sept. 5 granular urea postings included $280/st FOB Saginaw, Mich., and $285/st rail-DEL in Michigan.
Northeast: Granular urea remained at $265-$270/st FOB regional terminals, with the low reported at E. Liverpool, Ohio, and the high to dealers FOB Philadelphia, Pa. Sources also reported prilled urea available out of the E. Liverpool market at the $260/st FOB mark. Delivered granular urea was quoted at $282/st in southern Pennsylvania.
India: Despite reports Brazil was the main focus of urea talks at the TFI gathering in San Francisco, observers from Singapore to London were watching the IPL/India tender that closed Thursday, Sept. 14.
The Indian buyer snapped up close to 700,000 mt in the past couple of weeks and then called a tender for an unspecified amount. Sources say that once the latest round of private deals is taken into account, IPL only needs to buy 200-250,000 mt of urea to satisfy its needs for the rest of the year.
In addition to the 400,000 mt reported in last week’s Green Markets, additional tons arranged by Helm, Toepfer, and Ameropa last week boosted the amount to the now estimated 700,000 mt on order.
Sources say IPL was looking for prices no higher than what it paid in its last set of purchases – low to mid-$240s/mt CFR – but the initial results of the tender show sellers have other ideas.
While some offers did come in the low-$240s/mt CFR, the majority were $250/mt CFR and up. Still, said one source, some intensive negotiations are expected to take place over the weekend.
Traders were saying IPL is in a strong position because there are no other large buyers around and because IPL is willing to take granular or prilled material. Normally a prilled buyer, by allowing granular to be offered IPL is forcing prilled producers to chase the lower global granular price. Many of the offers indicated a $3/mt discount on granular product.
Offers follow:
Supplier
Source
Qty ‘000 mt
$US/mt FOB
$US/mt CFR
Notes
Helm
CIS/Romania
35
262.50
1st half Oct. Kandla dischrg
Transammonia
Open
60
243.50
Prill Sept-Nov
Open
60
243.50
Prill/Granular Minus $3/mt for granular Sept – Nov
Open
75
252.50
Prill Oct – Nov
Open
50
252.50
Prill/Granular Minus $3/mt for granular Oct.
Open
50
252.50
Prill/Granular Minus $3/mt for granular. Nov
Toepfer
CIS/Egypt Libya/China
55-60
245.43
2nd half Nov – Dec. Mundra dischrg
35-40
255.43
Kandla dischrg
35-40
261.83
Vizag dischrg
Bangladesh/China
20
228.50
ConAgra
Open
25
252.50
Oct-Nov. Prill or Gran Minus $3/mt granular Vizag dischrg
Ameropa
Open
85-95
243.50
Prill or gran. Minus $3/mt for granular Mundra dischrg Sept – Oct
Open
35
252.50
Prill or gran. Minus $3/mt for granular Vizag dischrg Sept – Oct
CIS
30-40
257.50
Prill , Vizag dischrg., Nov.
Keytrade
Open
50-60 Or
255.00
Prill or gran. Mundra dischrg
Open
2×35
262.00
Prill or gran. Vizag dischrg
Fertil
UAE
20
235.00
Nov-Dec
Qafco
Qatar
15-20
235.00
Nov-Dec
Sabic
Saudi Arabia
2×25
235.00
Nov-Dec
Freight rates have been steadily moving upward. Sources say increased demand for bulk carriers for grain and other commodities is beginning to affect the ability to ship fertilizer.
This increase in shipping is forcing a game of chicken among suppliers, traders, and IPL. The buyer does not want to pay more than it did in its last round of purchases – low $240s/mt CFR. As noted, a lot of traders offered tons in the tender with open sources – the hope being the trading house will be able to secure the necessary tons at a level acceptable to buyers and sellers. But with freight rate increases hitting daily, sources say pressure is building for the buyer to pay a little more and for the producers to shave off a little more.
With no other serious business on the horizon, some observers are putting their money on IPL winning this game.
Black Sea: There are now reports that producers are offering at $210/mt FOB, but with no takers. At least one Asian source said he would ordinarily like material at that level, but with what appears to be a softening market he is afraid to bid at $210/mt FOB and then watch the market continue to drop.
Because this hesitancy is pervasive, sources say no business has been done to confirm a new pricing level. As a result, officially the market is still sitting about $215/mt FOB – but with a lot of room, and potential for a drop. However, there were reports at press time that new business had moved to $220/mt.
Reportedly, Brazilian buyers at the TFI gathering were calling for a price of $235/mt CFR. Increasing freight rates would mean a netback of nearly $190/mt FOB. Sources in Asia and Europe don’t see that happening any time soon.
Middle East: Producers are comfortable for the next couple of months. In fact, their comfort level is so evident they offered prilled material in the IPL/India tender at almost $15/mt beyond the generally agreed-to market level.
While producers will claim the market has indeed moved into the $230s/mt FOB, traders and other sources say with no business to test that level the producers are merely engaged in attempts to jawbone the market up.
Still, say sources, stockpiles are limited. Middle East producers cut early deals with traders or IPL directly at prices that netback to $215-$220/mt FOB for both granular and prill – with some slight differences. Granular remains the main commodity under price attack, as supply levels from around the world feed into an already glutted granular market.
The IPL business was instrumental in making sure Sabic and PIC have no reserve building up. Cargoes slated for shipment to India are said to be booked well into November and possibly December.
China: Producers would like to sell offshore, but do not appear to be in a major rush to cut prices to do so.
Come Oct. 1, the export duty will be reduced to 15 percent from its current 30 percent. A traffic jam of vessels is already expected in most urea ports for October, as orders for a number of Southeast Asian countries and Bangladesh seek to be filled.
And pending approval by the Bangladesh government, another 400,000 mt could be slated for November and December loadings.
Add to those deals reports that Vietnam is still looking for tons in small lots to be sent to smaller ports near the end users.
Sources say the successful domestic season that is just about wrapped up left the producers in healthy financial shape. So much so, said one trader, that some producers are willing to walk away from business or not even begin talking until a higher price level is put on the table.
At the same time, new potential buyers are poking around. Sources report MITCO/Malaysia is looking for cargoes to make up for a shortfall in domestic production. Rumors continue to circulate that Indonesia may require a cargo or two for the same reasons.
For now, the price at the docks remains in the low $220s/mt FOB bagged.
Vietnam: Domestic producers continue to thwart efforts by importers to bring in tons. Sources report that every time someone gets close to arranging for a cargo from China, the domestic producers drop their prices so that the imported material is suddenly too expensive for the farmer.
Asian sources note that domestic production is significantly lower than demand, and that the actions to reduce imports is actually hurting the farmers. For its part, the government is backing the state-owned plants and claiming the gap between production and demand is smaller than outside analysts say.
NITROGEN SOLUTIONS
U.S. Gulf: At midweek, most sources said UAN barges had about topped out and prices were beginning to erode. They were called $155-$158/st ($4.84-$4.94/unit). As with urea, however, ideas for future pricing were down even more once gas prices started diving on Thursday.
Eastern Cornbelt: UAN-28 remained at $163-$175/st ($5.82-$6.25/unit) FOB regional terminals, with the low end confirmed last week by Illinois sources out of spot Mississippi and Illinois River locations.
Western Cornbelt: UAN was steady at $5.80-$6.25/unit FOB regional terminals, with the low on the river and the upper numbers inland.
Northern Plains: UAN was quoted at $5.70-$6.15/unit FOB regional terminals, with the low reported for spot sales to dealers in Minnesota. Delivered UAN-28 remained at the $185/st ($6.61/unit) mark in North Dakota for the last done business.
Great Lakes: The regional UAN market was quoted in a broad range at $6.15-$6.61/unit FOB, with the low reported in Wisconsin for prompt tons and the upper end reflecting reference pricing out of Michigan terminals. Delivered UAN was quoted at $6.41-$6.79/unit in the region.
Northeast: UAN-30 was quoted at $177-$180/st ($5.90-$6.00/unit) FOB Baltimore, Md., and Philadelphia, with delivered product pegged at the $202/st ($6.73/unit) mark in areas of southern Pennsylvania. Out of terminals in upstate New York, the UAN market was referenced at $6.75/unit FOB.
AMMONIUM NITRATE
Western Cornbelt: Ammonium nitrate remained at $245-$250/st FOB in the region.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate remained at $150-$155/st FOB in the region.
Western Cornbelt: Granular ammonium sulfate was steady at $150-$155/st FOB, with a posted increase reportedly scheduled for Sept. 20.
Northern Plains: Ammonium sulfate remained at $150-$155/st FOB and $155/st DEL in the region. A $5/st increase from Honeywell on Sept. 20 will put the warehouse reference price in the region at $160/st FOB, sources said.
Great Lakes: Granular ammonium sulfate was tagged at $155-$160/st FOB and $165-$170/st DEL, with mid-grade sulfate quoted at $145-$150/st DEL in Wisconsin.
Northeast: Granular ammonium sulfate was pegged at $147-$155/st FOB in the region, with the Philadelphia market quoted at the $150/st FOB mark. Delivered granular sulfate remained at $164-$175/st, depending on location.
PHOSPHATE
Central Florida: With the exception of sales made before Sept. 1, no new sales were reported last week, and that may not change for a while. Areas served by Central Florida have not begun their fall seasons, and some may not do much buying even when the season arrives. Dairy farmers in Pennsylvania are faced with a sharply declining price for milk, and many will be spending far less on phosphate and other fertilizers this season.
At TFI’s World Conference little was done in terms of new business. Dealers appeared to be taking only what they need from local terminals after a difficult year the last time. While business at warehouses has increased in recent weeks, that has not translated into new sales for resupply. Many sources said they did not believe business will pick up until sometime in December or January. Currently, producers have been able to keep inventories under control through heavy export sales, but that should begin to taper off in November unless some new, large sales are made.
In Texas, phosphate sales improved significantly last week, and Agrifos, which had resisted the move by major producers to lower its price for MAP, changed its mind last week and dropped the price of MAP to the same as DAP.
With no new business, the Central Florida DAP price range did not change last week and remained at $223-$226/st FOB. Mosaic’s posted price was $228/st FOB, but was selling as low as $226/st FOB; CF’s posted price was said to be $227/st FOB with sales at $223/st FOB. Prices do not include discounts; however, some large buyers can obtain a lower price without a discount from some producers. CF was said to be selling DAP as low as $223/st FOB. Mosaic discounts MAP $4/st from the price of DAP, while CF has no price difference. PotashCorp’s Central Florida reference price was still at $245/st FOB. In Texas, Agrifos’ prices were $255/st FOB for DAP or MAP.
U.S. Gulf: The NOLA DAP barge market has become strange, with a wide spread of prices in the range and most sales at the extremes. Miss Phos barges for resale by those under contract continue to be on the low end, while those sold by Mosaic, which enjoys lower freight rates because of its current contract, were on the opposite end of the range. How long cheap barges will be available was difficult to determine last week. A rumor, which could not be confirmed, was that a trader had bought 14 or 15 barges on the river for transloading onto a vessel for resale into Uruguay. If so, that would help to reduce the glut of cheap barges.
Terminals on the Arkansas River system continued to be busy last week and some reordering was taking place, although not enough to make the market healthy. The U.S. Army Corps of Engineers was scheduled to reopen the lock near Little Rock on Sept. 14, so barges will be able to make the trip. Since that was the most active area of the country for phosphate and other fertilizer sales, warehouses should not be in danger of running out. However, several sources said the wheat run in that area was running behind normal for this time of year. Many of the farmers were apparently waiting until October to begin planting. In addition, the rain that helped those parched areas in Oklahoma, Kansas, and northern Texas continued last week, and that will impact phosphate sales unless they get more moisture.
In general, the NOLA DAP barge market continues to run behind normal levels. Sales last week were at the extremes, which set the NOLA DAP barge price range at $221-$230/st FOB. However, freight rates continue to be a major factor in FOB pricing. The previous week’s range was $221-$227/st FOB.
Eastern Cornbelt: New phosphate sales were few after CSX Transportation implemented its higher seasonal surcharge of $250 per car, or $2.50/st, into effect on Sept. 1. Although activity out of regional warehouses was very limited in mid-September, one regional source said he thinks the fall will see an active warehouse market for phosphates due to late commitments from cautious buyers, along with expectations for increased corn acreage in 2007.
DAP was quoted as low as $255-$257/st FOB river warehouse, with inland pricing $10/st higher. Some sources maintained that the most common dealer price out of river locations was $260/st FOB last week. MAP pricing was the same as DAP, and TSP was quoted at $235-$239/st FOB river terminals and roughly $245/st FOB inland. 10-34-0 remained at $250-$260/st FOB in the region.
Western Cornbelt: DAP remained at $257-$265/st FOB regional warehouses, with MAP quoted in the same range. One Iowa source pegged the common river warehouse price for DAP at the $260/st level, with direct-transferred material trading at the $255/st mark or lower on the upper river system.
TSP was $235-$245/st FOB, with the low on the river and the upper end inland. 10-34-0 remained at $250-$265/st FOB, with the low in Nebraska and the upper end in Iowa.
Northern Plains: Phosphate demand was starting to pick up, as dealers who postponed summer fill commitments started positioning for the fall. DAP pricing was down from last report, with the market pegged at $260-$265/st FOB the Twin Cities. MAP was roughly the same price as DAP, with delivered green MAP unchanged at $295/st in North Dakota from western or northern shipping points. 10-34-0 was $265/st FOB and $275/st DEL in the region.
Great Lakes: DAP was pegged at $265-$275/st FOB regional warehouses, with dealer reference pricing reported as high as $283-$285/st FOB in Michigan. Delivered DAP was quoted by one Wisconsin source at $270-$275/st last week. MAP was essentially the same as DAP, and TSP was quoted at the $245/st FOB mark.
10-34-0 pricing was pegged at $265-$275/st FOB in the region, with the low in Wisconsin for prompt tons. The upper end of the range was quoted out of Michigan terminals and by Wisconsin sources for prepay 10-34-0.
Northeast: DAP and MAP remained at $275-$280/st FOB, with the upper end quoted as the dealer reference price FOB E. Liverpool. Delivered MAP was reported at $292/st in southern Pennsylvania. 10-34-0 remained at $255/st FOB terminals in upstate New York, and $270/st DEL in Pennsylvania. One source said the New York terminal market will firm on Oct. 1 to $260/st FOB.
U.S. Export: PhosChem made no new sales last week, but will ship about 750,000 mt during October – the biggest chunk of that to India. China was not scheduled to receive a phosphate vessel this month. Considering the U.S. domestic market has been at a virtual standstill, the heavy export schedule will help producers maintain lower inventories. If no new export sales are made during the next month or so, inventories will begin to grow.
A rumor circulating last week, which could not be confirmed, held that a trader purchased 14 or 15 DAP barges to transload onto a vessel for delivery to Uruguay, but the purchase price of the barges and the sale price into Uruguay were not available.
Freight rates continued to depress FOB prices for overseas sales, and there were no signs that that will change anytime soon. The export DAP price range was unchanged for the third week in a row at $259-$263/mt FOB.
Bangladesh: New DAP production has reportedly begun after the inauguration of two new plants by Prime Minister Khaleda Zia on Sept. 12. One was built by a Chinese firm and the other by a Japanese company in the Chittagong Urea Fertilizer Ltd (CUFL) complex. The DAP-1 project, involving Tk 5106.4 million ($73 million), has been funded jointly by the governments of Bangladesh and China and constructed by Chinese company Complant China. While involving a cost of Tk 5196.4 million, the DAP-2 project was jointly funded by the Bangladesh government and JBIC. Toyo Engineering Corp. and Mitsui Ltd. of Japan constructed the unit. The two new units will produce around 500,000 mt/y of DAP.
POTASH
Eastern Cornbelt: Potash remained at $195-$200/st FOB regional warehouses. One source reported some buying interest prior to the scheduled pricing increase in October.
Western Cornbelt: Potash remained at $193-$198/st FOB regional warehouses.
Agrium’s fuel surcharge rates decreased on Sept. 6 to 22.5 percent in Iowa, Nebraska, Missouri, the Dakotas, Minnesota, Wisconsin, Kansas, and Oklahoma, and to 22 percent in Texas and New Mexico.
Northern Plains: Potash remained at $198-$210/st DEL in the region, depending on location. Effective Oct. 1, postings from PCS Sales FOB Saskatchewan mines will move to $178/st for standard, $183/st for soluble and granular, and $188/st for white granular.
Great Lakes: Potash remained flat at $198-$204/st FOB regional warehouses, with the upper end quoted by Michigan sources for white granular potash. On a rail-delivered basis, the potash market was tagged at $200-$204/st in southern Wisconsin.
Northeast: Potash remained at $217-$236/st DEL for dry muriate, depending on grade and location, while pricing for 62 percent soluble potash was reported as high as $246-$260/st DEL in the region. The granular potash market FOB E. Liverpool was pegged at the $206/st mark last week.
SULFUR
Tampa: At TFI’s World Conference, sulfur buyers and sellers talked mostly about why the price should go up or down, depending on which end they were on, but nothing concrete took place.
BP was expecting to put its Texas City refinery, which suffered a fire and explosion earlier, back into full operation sometime in April. At the moment, sulfur supplies on the Gulf Coast remained in balance and should continue that way, unless a hurricane or other disaster strikes the area in the next few months. The world market continued to be depressed, and that will be the biggest factor in the upcoming fourth quarter sulfur contract negotiations. The main reason for lower world prices continued to be higher freight rates, and there was no sign that will change anytime soon.
Disclaimer of Warranty
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.
