OCI NV reports that its first-quarter own-produced fertilizer volumes were up 13.3 percent to 1.3 million from the year-ago 1.15 million mt. However, the company said consolidated first-quarter revenues were approximately the same as last year as the increased fertilizer production was offset by lower margin third-party traded volumes, which were off 25 percent to 348,300 mt from 464,500 mt, as well as by lower prices.
OCI said adjusted EBITDA was slightly lower than year-ago levels, reflecting higher natural gas costs and start-up costs for the Iowa Fertilizer Co. plant. In the U.S. Henry Hub spot gas prices increased to $3.00/mmBtu, up from $2.00/mmBtu, while the Europe TFF spot gas prices increased to $5.8/mmBtu from $4.1/mmBtu.
OCI reported higher fertilizer utilization rates in North Africa and a return to normalized production in The Netherlands after a year-ago outage prompted by a fire (GM March 18, 2016), which particularly impacted calcium ammonium nitrate production. Ammonia volumes were up at Sorfert in Algeria and are expected to resume at normal levels at Egypt Basic Industries (EBIC) in July once the company regains access to its export jetty in June.
Urea was at full rates at Egyptian Fertilizers Co. and OCI said it is encouraged by new gas production coming on line in the country as well as new discoveries.
Company-produced fertilizer volumes are expected to increase in the second quarter as they will include Iowa Fertilizer Co. plant in Wever, Iowa, which opened in April (GM April 21, p. 1). OCI says that plant is now producing and selling ammonia and downstream products.
As for third-party traded fertilizer, ammonium sulfate volumes were down 49 percent to 205,600 mt from the year-ago 405,200 mt. UAN saw a boost at 82,200 mt, up from 4,000 mt.
As for market conditions, OCI cited the volatile urea market and the late application seasons in the U.S. and Europe, lower import demand from India and the reconciliation of additional capacity. It said it believes current low prices are not sustainable and below break-even costs of marginal producers in China and elsewhere.
In the medium term, OCI believes the supply-demand balance to be more positive with global urea expansions slowing to below trend demand growth over at least the next four years, even before taking into account Chinese capacity closures. It believes potential rebounds in Chinese urea exports to be capped by environmental curtailments and increased focus on profitability of the industry.
In the Industrial Chemicals, OCI says its Natgasoline methanol project in Texas was 81.1 percent complete at the end of the March and the company’s board has agreed to refurbish and restart the second methanol plant at BioMCN in The Netherlands with this expected to add another 430,000 mt/y.
Overall, OCI-produced volumes, both fertilizer and industrial chemicals, were up 12 percent during the quarter.
Berezniki—Uralkali says work at its Ust-Yaiva mine development is on schedule, with first production planned for 2020, according to a Bloomberg report, citing a company statement. Uralkali expects the entire project, including the processing plant, will be on-line after 2022, with a capacity of 2.5 million mt/y.
With major crop nutrient prices still at record lows, specialty value fertilizers, micronutrients, and growth in key markets such as Brazil were themes across multiple presentations at the 12th annual BMO Farm to Market conference, which took place this week in New York.
Major fertilizer producers also remained generally optimistic about a near- to medium-term turnaround in the market, but with differing views on major commodities.
CF Industries remains positive on the market, and continues to see current low pricing as unsustainable, particularly with regard to urea. The company is preparing for market impacts from new domestic capacity, but touted its ability to switch from urea to UAN and its access to potentially higher prices in the global markets. CF noted that China will always be important, even though its weight on the global export market has been reduced.
Both Agrium and PotashCorp reported that their merger remains on track. Retail distribution, low cost production and synergies, and a strong balance sheet were among the highlighted bullet points.
Agrium was particularly bullish on its nitrogen position, highlighting the company’s facility locations and its exposure to the Pacific Northwest price premium. Agrium said it sees the nitrogen market bottoming in 2017. The company also highlighted its lowered position on the potash cost curve, with its ramped-up production at Vanscoy and reduced CAPEX. Agrium said it is still expanding its retail network and seeking to add locations and increase market share.
PotashCorp noted global inventory drawdowns against a backdrop of new capacity ramp-ups and strong demand for potash markets this year. The company said it anticipates reasonably balanced potash markets in the medium term and the potential for deficit after 2021. In the nitrogen market, PotashCorp highlighted the difficulties the current market faces but remains more bullish for 2018 and beyond.
Eurochem highlighted the current ramp-up schedule of their highly anticipated potash mines, with the first tons expected in late 2017 and production ramping up to 2025. The company said it remains mindful of market impacts as it ramps up capacity. Eurochem also highlighted its specialty product portfolio and anticipated ammonia self-sufficiency in the near-term. Eurochem reiterated its current focus on its potash expansion and said it will evaluate other potential projects down the line.
Compass Minerals noted strong uptake of micronutrient products through their PDQ division, as well as continued demand for its specialty products and SOP in North America. Other presenters with developing specialty fertilizers included Sirius Minerals and Anuvia.
Israel Chemicals (ICL) highlighted its high quality asset base and movement toward specialty with new time release and polysulfate products. The company noted the potential to migrate its China phosphate joint venture to specialty products as well. ICL said it remains committed to cost improvement of assets, with Spanish potash capacity remaining a large focus as well as its migration away from MOP in the U.K. The company said it is also interested in bolt-on acquisitions for specialty fertilizer players in the $100-$150 million range.
K+S reiterated that its new Legacy mine in Saskatchewan is now open, with the first product expected by the end of June and production targets remaining at 0.5-0.7 million mt for 2017. With the Legacy investment now over, the company is aiming to release “Shaping 2030” this fall to promote future strategy. K+S downplayed any risk to North American storage capacity, citing the strength of its distribution channel partner, Koch Fertilizer LLC. The company said it would also be willing, post full ramp up of its Canadian capacity, to curtail on the supply side in Germany.
Other trends discussed at the conference, particularly at the farm level, included concerns about immigration and trade patterns with any changes in NAFTA. Labor concerns were particularly worrisome for several of the presenters with regard to specialty crops.
Eastern Cornbelt: The ammonium thiosulfate market remained at $240-$270/st FOB in the Eastern Cornbelt.
Western Cornbelt: Ammonium thiosulfate was unchanged at $265-$275/st FOB in the Western Cornbelt.
Southern Plains: Ammonium thiosulfate was steady at $215-$235/st FOB in the Southern Plains, with the low out of Gulf Coast terminals and the upper end inland.
South Central: The ammonium thiosulfate market was quoted at $250-$260/st FOB for prompt tons in the South Central region.
U.S. Gulf: NOLA granular prompt barges dug in their heels just a bit last week, with trades reported at $166-$172/st FOB, up from the prior week’s $164-$170/st FOB.
In the meantime, prills were called $176-$180/st. A mid-June Libyan vessel is expected in the Gulf and should be testing the market soon.
Eastern Cornbelt: The urea market remained at $205-$225/st FOB in the Eastern Cornbelt, with the lower end of the range confirmed at Cincinnati, Ohio, and out of terminals in southern Illinois, and the upper end at Burns Harbor, Ind.
Western Cornbelt: The granular urea market was pegged at $215-$230/st FOB in the Western Cornbelt, with the low reported at St. Louis, Mo., and the upper end out of spot terminals in the Iowa market.
Sources quoted the Minneapolis, Minn., urea market in the $220-$230/st FOB range for the week, up slightly from the prior week, with barge movement on the Mississippi River remaining slow due to high water.
Southern Plains: Heavy rainfall raised water levels on the Arkansas River in early May, bringing barge traffic to a halt and depleting fertilizer inventories at Catoosa/Inola, Okla. Limited barge movement had reportedly resumed at midweek with restrictions on speed and tow sizes, but sources said the supply problems will persist.
“It feels like this problem will hang on at least two more weeks without any more big rains,” said one contact. Another source said overall inventories at Inola on May 16 were estimated at 35 percent.
Spot urea prices were moving as a result of the tight supplies. Sources quoted the granular urea market at $230-$240/st FOB Catoosa, up $20-$25/st from just three weeks earlier, with one source describing inventories as “okay” at midweek. The low end of the regional range was quoted at $225/st FOB Houston at mid-month.
South Central: The urea market in the South Central region ranged broadly from $195-$215/st FOB at mid-month, down $15-$20/st from last report, with the low confirmed at Convent, La., and the upper end at Little Rock, Ark. Other spot prices included $205/st FOB Memphis and Caruthersville, Mo., for new sales.
Wet field conditions have delayed the start of rice topdressing, but several sources said they expect urea movement to begin as soon as fields dry out. “Farmers are trying to get excess water off the fields so they can make their first application,” said one contact. “We expect the window to be short and fast when the ground dries. Some of the rice and corn that is emerged is showing signs of yellowing, so it needs some nitrogen and sulfur.”
Southeast: Sources pegged the granular urea market at $230-$240/st FOB port terminals in the Southeast, down a full $25-$30/st from last report, with the low end of the range confirmed in the Savannah, Ga., market for new sales.
India: India Potash Ltd. called a urea tender on May 18 to close on May 29. The tender was expected, but not for another week or so.
Sources said IPL most likely called the tender to allow discussion during the IFA conference in Marrakech next week. One observer pointed to the 12-day period between the announcement and the closing of the tender. Normally the Indian buyers give one week for offers to be submitted. The closing date, said one trader, is long enough after the closing of the IFA event to allow sellers plenty of time to digest the information they gleaned at the conference and then prepare their offers.
The tender call specified that 60 percent of the offers must be for West Coast unloading. Sources said this makes sense, because the rains will start in the west and move eastward as the monsoon season progresses. All awards must be shipped by July 10.
Sources said the IPL agents will be looking for prices lower than the $229-$231/mt CFR level that MMTC paid last month. The main players in this tender are expected to come from Iran and the Arab producers.
One trader said there are few sales on the books of the Arab producers for late June. At the same time, Iran is expected to have at least 300,000 mt available to offer in the tender. The combination of Arab and Persian producers with excess tons is leading industry watchers to see tender prices lower than last month.
India needs to import just under 1 million tons each month through October to ensure sufficient reserves are on hand. As the fiscal year started last month, the government predicted that imports will be able to drop to 6-6.5 million tons from the 7-8 million tons in previous years. The expectation of fewer imports comes from increased domestic production and reduced demand.
The Indian government has been aggressive in pushing companies to open new urea plants or upgrade previously shuttered facilities. Besides offering financial support to opening plants, the government has worked to ensure a steady supply of natural gas and other inputs.
The requirement is that all domestic urea be neem coated. The coating allows for a slower release of the nutrients, thus driving down the demand from individual farmers.
Pakistan: The Economic Coordination Committee of the government has approved an additional export of 300,000 mt of urea by the end of the year. The move also extended the export period for urea from the initial end date of April 30, 2017.
Permission to export urea first happened last year, when lower demand and stepped-up domestic production combined with aggressive imports to create an excess of product. This year, imports are expected to be cut completely. Domestic production only just started to cut back in the past few weeks. Demand remains weak because of poor weather conditions.
The government would like the offshore sales to earn a profit. Sources said sales to African buyers in late April and early May had netbacks around $230/mt FOB, which was high enough for the bean counters.
Offers of Pakistan material in last week’s Sri Lanka CFC tender indicated netbacks below $210/mt FOB. While no awards had been made in the CFC tender at press time, sources said any deal involving Pakistan tons will be difficult to fulfill unless the Pakistani producers and government alter their pricing ideas.
The hard currency earned from the exports has been a major consideration by the government and the companies handling the sales. The government has also been looking at ways to save money on the subsidies paid for urea.
The CEO of Engro suggested to local media that the government should consider simultaneously dropping the sales tax and subsidies on urea. Ruhail Mohammad said the two values cancel each other out.
China: Producers continue to hold to their ideas of prills at about $215/mt FOB and granular at $210/mt FOB, depending on the quality of the product.
Sources said some Chinese producers may end up backing traders in the IPL/India tender, but most are expected to sit out this round. If the Indians are successful in securing prices lower than last month’s tender, the netback will be below current levels for prills. Sources said there is little incentive for the producers to aggressively go after the business. They point to better netbacks from sales into Southeast Asia and a steady stream of domestic buying. The reduction in output is also helping hold up prices.
Once the Indian business is concluded, sources said Chinese producers will look to buyers in eastern Asia. Sources already report inquiries coming from South Korea with netbacks that hold the line on prices.
Middle East: Industry watchers expect Iran and a few Arab producers to dominate the IPL/India tender that closes on May 29.
The Indian buyer wants 60 percent of the deliveries to be into Indian West Coast ports, giving the Persian and Arab product an edge over China. Iran is expected to be the price setter for this tender, with Arab producers following closely enough to secure awards.
Sources said few sales are on the Arab producers’ books for late June and early July. Most of the contracted business is expected to be concluded by the end of June, leaving July dependent on a few formula-based cargoes and spot business. At the same time, production is expected to be at normal levels, leaving producers with growing reserves.
Egyptian urea prices rebounded back above $190/mt FOB during the week. Sources said several small-cargo sales were concluded into Turkey, with a few buyers covering shorts into Europe.
Indonesia: Talks are continuing between urea traders and producers. The Indonesian manufacturers continue to call for a formula-based system and a floor price.
Initially the producers called for a floor of $225/mt FOB. Last week the number was reduced to $222-$223/mt FOB, and this week sources said the new offer was at $220/mt FOB. One trader noted, however, that $210/mt FOB is too expensive in the current market. Talks are expected to resume after the IFA conference.
Nepal: The Agriculture Inputs Co. started importing urea sooner than in previous years. Urea for Nepal usually enters through an Indian port and then by rail. So far, AIC has about 60,000 mt booked for delivery into the country by mid-June. The government-owned company said these two cargoes will be more than enough to get the upcoming application season started next month.
Demand for urea in Nepal this year is pegged at 700,000 mt. Urea makes up about 65 percent of fertilizer needs for the land-locked country.
Bangladesh: As a part of its import plan, Bangladesh will import 50,000 mt of urea from the Middle East on state-to-state deals. Bangladesh Chemical Industries Corp. (BCIC) has invited tenders for 50,000 mt of bulk granular urea (minimum offer quantity 25,000 mt ) in shipments from Ruwais, U.A.E., and delivered in 50-kg bags at Chittagong Port. Bids are due on May 24.
Meanwhile, according to BCIC’s website and local media, urea production at a number of plants has been disrupted since the beginning of May because natural gas has been diverted to power plants to maintain power supply to domestic consumers during the summer.
Univar Inc., Downers Grove, Ill., appointed David C. Jukes as president and chief operating officer, effective May 4, 2017. He will continue to report to Stephen D. Newlin, chairman and CEO.
The company says Jukes is a seasoned executive with more than 35 years in the chemical and plastics distribution arena. As a 14-year Univar veteran, he most recently served as executive vice president and president, USA & Latin America. In his new role, Jukes will oversee day-to-day operations of all of Univar’s business segments, including Canada, EMEA, and Rest of World, and he will maintain direct responsibility for the U.S. and its transformation.
Prior to Univar, Jukes was senior vice president of global sales, marketing and industry relations for Omnexus, a plastics industry e-commerce platform. He is a graduate of the London Business School.
U.S. Gulf: High-water conditions continued to slow lock operation in the Gulf. An 11.4-foot water differential between Industrial Lock’s river- and canal-side gauges contributed to a 34-boat queue on May 17, with sources estimating delays in the 26-34 hour range. Port Allen Lock waits were reported at six hours while facing a 32-foot water differential. Algiers Lock waits were called 7-8 hours.
The Baton Rouge, La., river gauge crossed above the 35-foot minor flood stage on May 13, reading 36.69 feet and rising on May 17. The NWS predicted a major-flood-level crest at 41 feet on May 25, and the gauge is expected to continue above flood stage into early June, at a minimum. New Orleans remained below the 17-foot flood stage at 14.3 feet and rising on May 17.
The Brazos River Floodgates are closed to navigation on Monday through Friday, 7:00 a.m. to 5:00 p.m., through May 31. Sources estimated Brazos Lock waits at 3-7 hours on May 17, with 10 boats queued to lock. Dredging underway in the West Canal slowed transits at Miles 395-400. The dredge is working on a 24-hour, seven-day schedule until further notice. Vessel operators are requested to contact the dredge for passing instructions prior to arrival.
Harvey Lock is scheduled to undergo a full dewatering shutdown for repairs and maintenance in August and September. Sources described a tentative Aug. 1 through Sept. 30 closure window. Algiers Lock will be tapped as an alternate route while Harvey is offline, and transit delays are expected.
Mississippi River: Mississippi River navigation continued to be slowed by high water and fast flows.
Levels returned to normal immediately south of the Twin Cities area, but persistent high water forced the Corps to open dams to full-bore below Dubuque, Iowa, resulting in fast, unpredictable flows and a 20 percent cut to barge counts. Shippers expected the reductions to slow transits by at least 2-4 days.
Tows were reduced by 5-10 barges between St. Louis and Cairo, Ill., with navigation further delayed by a daylight-only running restriction in the area slated to last as long as flooding persists.
Southbound tows were reduced by a reported 5-15 barges between Cairo and Baton Rouge. Vessels were required to run during daylight hours only through the Memphis and Vicksburg, Miss., areas, precipitating additional delays of 2-3 days.
A pair of 36-hour closures were scheduled to interrupt Lock 11 navigation on May 16-19 and again on May 23-26. The river will be fully closed at Lock 11 during the shutdowns. The Lock 15 auxiliary chamber is unavailable through Aug. 3.
Delays of 3-4 hours were heard at Locks 20 and 22, while the Corps reported average delays of more than six hours at both Lock 24 and Lock 25 on May 17. Mel Price Lock and Dam experienced scattered waits of more than 24 hours on May 16-17.
Illinois River: Shippers reported widespread navigation delays on the Illinois Waterway, with slowdowns evident in pickups, drop-offs, and total transit times. At least 1-2 days of extra travel time were required for area navigation. The Beardstown, Ill., river gauge registered 22.9 feet on May 16, considerably above the 14-foot minor-flood threshold.
Ohio River: High-water operating conditions persisted on the Lower Ohio River last week. Paducah, Ky., remained slightly above the 39-foot minor flood stage on May 16, while the Cairo gauge registered a moderate-flood-stage 49.4 feet on May 17. NWS forecasts called for Cairo to remain at flood stage through May 23, with action-stage levels predicted to last until May 26-27.
Meldahl Lock repair and maintenance activities, underway since May 7, are scheduled to force traffic through the lock’s auxiliary unit until Oct. 2. The Corps estimated Meldahl wait times at just under eight hours on May 17.
Demolition work was scheduled to block Ironton-Russell Bridge transit at Miles 326-328 on May 17, with follow-up closures planned for May 29 and June 15. The Greenup Lock main chamber will be unavailable for daylight transit Monday through Thursday, June 5 through July 21. The main chamber at Cannelton Lock will shut down July 5 through Sept. 5, with “excessive” delays anticipated.
Emsworth Lock will close its main chamber to daylight travel June 26 through Sept. 22. Navigation will to subject to an 80-foot width restriction and limited to the hours between midnight and 8:00 a.m. Sources reported the lock will also reopen to navigation every other weekend.
Lock 52 will intermittently lose its auxiliary chamber to repairs July 17 through Sept. 29. The Belleville Lock main chamber will be offline Oct. 2 through Dec. 7, with delays expected.
Shippers described a return to normal operating conditions on the Tennessee and Cumberland Rivers last week. The Tennessee River’s Wilson Lock has experienced intermittent daylight-hour shutdowns since April 17 due to ongoing repairs. The work is slated to conclude on June 8.
Shippers bemoaned excessive delays on the Monongahela River, where Lock 4 is closed to weekday navigation. Vessel traffic is limited to weekend locking only via the site’s auxiliary chamber, with transit limited to a single barge per locking for the duration of the shutdown, scheduled through June 20.
Arkansas River: Limited navigation returned to the Arkansas River for the first time in more than two weeks. While Catoosa itself was said to be operational on May 15, shippers reported being unable to reach it given the current conditions. However, terminal sources reported that Catoosa had become reachable by “small tows” on May 17, with vessels restricted to daylight-only navigation.
Boats were “moving cautiously” at Little Rock, and despite Muskogee, Okla., being open for docking, sources reported elevated water levels preventing barges from loading or unloading on May 15.
Dive operations are scheduled to close Dardanelle Lock on June 9-11 and Sept. 5-14.
U.S. Gulf: Last-done on the TSP barge market was quoted at $275/st FOB, unmoved from the previous week.
South Central: TSP was quoted at $305-$315/st FOB for prompt tons in the South Central region, with the low end of the range also reflecting a drop of $5/st from last report.
U.S. Gulf: NOLA UAN barges continued to move down last week, and were generally put in the $165-$170/st ($5.16-$5.31/unit) FOB range. Others said NOLA needs to be anywhere from $140-$160/st FOB to attract any business in the near term, however.
The last done business for East Coast vessels was called $165-$170/mt CFR.
Eastern Cornbelt: Sources reported the low end of the UAN-32 market at $175/st ($5.47/unit) FOB Cincinnati and Mt. Vernon, Ind., after a significant producer pricing adjustment at mid-month. The move was met with incredulity from some dealers who had already positioned tons for the upcoming sidedress run. “They are building no trust with anybody in my opinion,” said one regional source.
The upper end of the UAN-32 market was pegged in the $190-$200/st ($5.94-$6.25/unit) FOB range in the region, depending on location.
Western Cornbelt: UAN-32 remained at $190-$205/st ($5.94-$6.41/unit) FOB in the Western Cornbelt, with the low end of the range quoted at Sergeant Bluff and Muscatine, Iowa. Pricing out of the Fort Dodge, Iowa, market was pegged at the $195/st ($6.09/unit) FOB level for new sales at mid-month.
Southern Plains: UAN-32 pricing was under pressure in the Southern Plains, with sources reporting that suppliers “don’t want to miss any business” at this stage of the season. The low end of the range was quoted at $185/st ($5.78/unit) FOB Texas Gulf Coast terminals and $190-$195/st ($5.94-$6.09/unit) FOB Oklahoma production points, with the upper end of the regional market pegged at $200/st ($6.25/unit) FOB out of truck terminals in Kansas.
South Central: The UAN-32 market had reportedly slipped in the South Central region, falling to $190-$195/st ($5.94-$6.09/unit) FOB terminals, down a full $20-$25/st from three weeks earlier.
Southeast: UAN pricing remained under pressure in the Southeast. Sources quoted the UAN-32 market at $175-$180/st ($5.47-$5.63/unit) FOB in the region, down roughly $10/st from last report, with the bulk of port terminals reported in the $176-$178/st ($5.50-$5.56/unit) FOB range for new business.
Washington—The U.S. Senate Committee on Homeland Security and Governmental Affairs on May 17 passed the Regulatory Accountability Act of 2017 (RAA), which they said would ensure a transparent, accountable, and common sense regulatory process. The bill now moves to the full Senate for a vote.
The legislation was praised by both The Fertilizer Institute (TFI) and the Agricultural Retailers Association (ARA). “We understand and support the need for reasonable, science-based regulations, however, the process by which laws are passed and implemented by Congress is too costly, confusing, and cumbersome,” said TFI President Chris Jahn. “The time has come for Congress to act and modernize the regulatory process. The changes proposed in the RAA are a positive step in the right direction of ensuring the proper balance between workable regulations and addressing the needs and concerns of impacted stakeholders.”
ARA cited examples of what it described as “excessive expansion of federal regulations” over the past seven years that it said would “impose unprecedented costs on American Industries.” ARA said these include EPA’s Risk Management Program (RMP), the current Waters of the U.S. (WOTUS) rule, duplicative permit requirements, the new Worker Protection Rule (WPS), Certification and Training Applicator rules, and the registration and review process for pesticides.
“All stakeholders have a right to a fair, open, and transparent rule-making that respects the proper role of the states and the intent of Congress,” ARA said. “The nation needs a regulatory process that fosters transparency, enhances public participation, imposes accountability in agency decision making, and ensures that agencies follow Congressional intent.”
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.
