Yara International ASA reported second-quarter net income after non-controlling interests of NOK699 million (NOK2.56 per share), compared with the year-ago NOK3,072 million (NOK11.23 per share). Revenues were NOK23,471 million, down from NOK25,866 million.
“Yara reports a weaker result than a year earlier, primarily reflecting lower commodity margins,” said Svein Tore Holsether, Yara president and CEO. “Our industry is facing strong over-supply of urea and other commodity nitrogen products, and we have expected this development for some time. We are therefore focused on improving our operations, and making growth investments primarily within premium fertilizer and industrial applications where margins are more stable. The Yara Improvement Program and growth pipeline [are both] on track to deliver minimum NOK17 per share of annual earnings improvements within 2020.”
Yara said strong urea capacity increases outside China are weighing on global urea prices, as non-Chinese FOB prices are reduced in order to displace Chinese exports. Yara expects this situation to persist into 2018 given the number of new plants expected to enter the market over the next year.
Excluding net foreign exchange gain and special items, the result was NOK2.90 per share, compared with NOK6.29 per share.
Second-quarter EBITDA excluding special items was NOK2,873 million, down 27 percent compared with a year earlier.
Total fertilizer deliveries were 3 percent lower than in second-quarter 2016. Adjusted for the divestment of Yara’s CO2 business last year, Industrial deliveries were 8 percent higher than a year earlier.
Yara said margins were impacted by both higher gas costs and lower realized prices. Yara’s average realized fertilizer urea prices decreased 7 percent, while realized nitrate and NPK prices were 1 and 5 percent lower, respectively. Yara’s average global gas costs were 24 percent higher than a year ago.
Yara said ammonia production was off 7 percent during the quarter due to a major turnaround at the Le Havre plant in France and a fire at the Porsgrunn, Norway, plant, in April. The Porsgrunn plant is expected to start up again toward the end of the third quarter.
Six-month Yara net income was NOK2,392 million (NOK8.75 per share) on revenues of NOK46,106 million, down from the year-ago NOK5,872 million (NOK21.45 per share) and NOK50,919 million, respectively.
Yara Deliveries (000 mt)
2Q-17
2Q-16
1H-17
1H-16
NH3 trade
1,803
1,929
3,683
3,937
Urea
1,239
1,326
2,404
2,499
Nitrate
1,136
1,363
2,671
2,836
NPK
2,304
2,256
4,709
4,443
CN
355
343
655
626
UAN
465
483
785
837
SSP
410
298
522
411
DAP/MAP
178
227
358
493
MOP/SOP
366
383
535
552
Other
253
243
453
452
Fert Total
6,707
6,921
13,092
13,148
Industrial
1,736
1,784
3,537
3,501
Total
9,070
9,277
17,679
17,759
Yara noted that the global farm margin outlook and incentives for fertilizer application remain supportive overall, and the price trend for cereal, meat, and dairy has been positive year to date. It said that in Europe, Yara is seeing a normal rate of order taking at the start of the new season at higher prices than a year ago, and expects roughly stable European nitrogen consumption for the 2017/18 season. Based on current forward markets for oil products and natural gas, Yara’s spot energy costs for the next two quarters are expected to be approximately NOK225 million higher than year-ago levels.
Prompt granular barges were generally put in the $172-$182/st FOB range last week. All August was called $183-$185/st FOB. Sources continued to say product was in tight supply due to export, re-exports, and buyers finding the bottom. In the meantime, some suggested prices may not get too much higher, else they attract imports and drive it lower again.
Yara, lamenting the weak urea market, told analysts it intentionally shipped less urea to the U.S. during the quarter in favor of sending more premium products to the East and West Coasts.
The last done prills continued to be called $185-$188/st FOB.
Eastern Cornbelt:
The granular urea market was steady at $195-$220/st FOB in the Eastern Cornbelt, with the low reported at spot river locations and the upper end out of inland terminals.
Western Cornbelt:
Urea pricing out of river terminals was moving up in tandem with the recent NOLA rally, sources said. Granular urea had reportedly inched up to $195-$200/st FOB St Louis, Mo., with Iowa sources reporting a firm $200/st FOB level out of most river locations. Inland terminals were pegged in the $210-$215/st FOB range in the Western Cornbelt.
The Minneapolis, Minn., urea market was reported at $197-$205/st FOB, also up from last report, with some sources reporting even higher numbers at that location as the week progressed.
Southern Plains:
Urea pricing was firming in the Catoosa/Inola market in Oklahoma. Some suppliers were still quoting a $195-$200/st FOB range during the Southwestern Fertilizer Conference, while others called the market a firm $205-$210/st FOB as the week advanced.
“Urea is limited, and it has moved up. Few traders are bringing urea into Tulsa these days,” said one contact, citing earlier aggressive offers out of Enid, Okla., and Borger, Texas.
South Central:
Urea movement on rice was “down to a snail’s pace” in the South Central region, according to several contacts.
Urea pricing was quoted at $195-$205/st FOB in the region, up $5/st from last report, with the low confirmed at Caruthersville, Mo., and the upper end at Memphis. The urea market out of Arkansas terminals was generally pegged in the $200-$205/st FOB range at mid-month.
Southeast:
Granular urea was pegged at $215-$225/st FOB in the Southeast at mid-month, with the low quoted in the Savannah, Ga., market and the upper end at Wilmington, N.C. Sources also reported rail-DEL tons coming into the North Carolina market at $234/st from the river system.
India:
The MMTC tender closed Thursday with prices low, but not as low as traders were expecting.
In the run-up to the tender industry sources were predicting offers around $200/mt CFR, with a few outliers in the $190s/mt CFR. However, when the final tally was revealed, the lowest price was $230.06/mt CFR from Comvest. All told, just over 1.4 million tons were offered by 17 companies.
In the end, about 600,000 mt were offered at $204.50/mt CFR or less. This amount is at the low end of what industry watchers were saying MMTC would buy.
The week started with concern that fewer tons would be offered when Iranian producers started telling traders the country would only have 250,000-300,000 mt available for the tender. Just last week, traders were counting on closer to 400,000 mt to be available.
Sources discounted any support from China in this tender. That left cargoes from Arab producers to fill in the gap between what Iran could offer and the expected 600,000-700,000 mt that MMTC would buy. Traders looked at potentially available cargoes from the Arab Gulf and saw that about 200,000 mt of spot material could be purchased – if the price was right. An additional 200,000 mt could be cobbled together if the producers were willing to delay a contracted cargo.
Because the offers are from Arab and Persian producers, the number of offers to East Coast ports are limited. Only five companies offered tonnage to East Coast ports. The difference in pricing made for some interesting reading.
Usually there is a $5-$9/mt price difference between the two coasts. This time the difference ranged from a few cents to $15. The higher priced material – $219/mt CFR from Aries – will not be accepted by the buyer, and the offering company will most likely not be able to lower its price to secure an award.
The tally from the tender follows.
Offering Company
Quantity Offered (mt)
Price US$/mt
Discharge Port
Firm
Optional
FOB
CFR
Muntajat
40,000
190.00
Fertil
35,000
200.00
Comzest
280,000
120,000
203.06
Pipavav
203.15
Rozi
203.60
Mundra
204.50
Gangavaram-Karaikal
204.23
New Mangalore
204.50
Kandla
204.96
Hazira Adani
Helm
110,000
204.25
Mundra
205.34
Kandla
Swiss Singapore
40,000
204.50
Mundra
MTPL
40,000
204.50
Rozi
Transagri
135,000
204.50
Rozi
206.50
Pipavav
207.50
Mundra
Transglobe
60,000
206.00
Rozi
Amber
60,000
207.75
West Coast
208.75
East Coast
Koch
47,500
208.82
Mundra
Dreymoor
120,000
212.50
Gangavaram
209.90
Pipavav
Keytrade
50,000
211.90
West Coast
CHS Europa
84,000
212.37
Mundra-Kandla
218.73
Vizag
Ameropa
50,000
212.50
Mundra
Continental
50,000
212.75
Adani Tuna-Mundra
213.75
Pipavav
Midgulf
120,000
213.00
East Coast or West Coast
Aries
100,000
219.99
Gangavaram
218.99
Adani Tuna
The direct offers from Oman and the UAE were not a surprise to industry watchers. Sources reported Fertil indicated it would not support traders offering its material into this tender. For one observer, this was a strong indication that Fertil did not want to compete against its own product.
MMTC will now review the offers and bid with prices based on East Coast or West Coast deliveries. Muddying up the waters this time, however, is that Comvest holds the pole position for both. It has the lowest West Coast price of $203.06/mt CFR, with the East Coast at $204.50/mt CFR. Traders with West Coast offers at $208/mt CFR to $219/mt CFR will be hard-pressed to match the Comvest price.
The ship-by date is September 1.
Middle East:
Rumors this week that Iran would only have 250,000-300,000 mt available for the Indian tender sent a nervous shudder through the industry. Until the Iranian producers started down-talking their output, most in the industry were expecting Iran to cover a bit more than 400,000 mt in a tender that would take no more than 700,000 mt.
Sources began counting the potential tonnage available from Arab producers to get a better sense of how tight the market might be. One trader calculated about 12 cargoes available in both spot and contract tons. Another, who looked at only potential spot cargoes, said there could be as many as six cargoes available. In the end, two producers offered tons directly to MMTC for a total of 75,000 mt.
Traders reported that calls to Arab producers looking for tonnage were met with cold shoulders. In the end, one trader said the producers were unwilling to quote a price until the MMTC/India tender closed on Thursday.
Buyers were looking at the $188/mt FOB price Ameropa secured from PIC last week. The unwillingness of the producers to quote prices before the MMTC tender closed became clear when the producers who offered directly to MMTC came in at $190/mt FOB and $200/mt FOB.
The $203/mt CFR low price in the Indian tender has an estimated netback to Iran of about $190/mt FOB. Sources said that price would be welcomed by the Iranians, especially after Helm reportedly picked up a couple of cargoes at $185/mt FOB last week.
Sources reported that Fertil has warned off traders, saying it would not support any offers into the MMTC tender. Some in the industry took that as an indication Fertil wanted to offer its own tons at a price of its choosing, rather than be forced to a lower price by MMTC and a trader.
Sources said traders were looking at the Ameropa/PIC cargo to be offered in the MMTC tender. Now, there are reports the cargo is going to Brazil.
Besides India, Brazil and the rest of Latin America remains a strong market for Arab Gulf product. One trader noted sales to Brazil have been strong enough that Arab Gulf producers do not feel a need to lower their prices.
Indonesia:
Despite arguments from buyers that the floor price of $210/mt FOB is too high, urea producers are sticking their guns and holding firm. Sources said bids in the low-$190s/mt FOB were dismissed out of hand. A trader said even at that price it would be difficult to find a buyer.
Black Sea:
The few tons that are available out of Yuzhnyy are being offered at $185/mt FOB, with no wiggle room for bargaining.
Tonnage out of the area is limited, because all the Ukrainian material is being used to cover needs in the domestic market. The only product getting to the port, said one trader, is Russian prills.
Sales out of Yuzhnyy are reportedly heading mostly to Turkey. Sources said the $185/mt FOB price puts the price too high to be considered anywhere outside of the Black Sea.
China:
Prices remain stable, but too high to be considered in the MMTC/India tender. Domestic demand, along with dwindling production, are working together to keep prices stable.
Nepal:
A tender for 30,000 mt closes Monday, July 24. The tender includes 20,000 mt of DAP. The cargo is to be bagged, unloaded in India, and shipped to warehouses in Nepal.
Russian rail operator Unicon 1520 has signed a contract with Uralchem-Trans, the transport subsidiary of Uralchem, to provide services for the transportation of liquid chemicals cargoes in 72 mt tanks in Russia and Eastern Europe. Unicon 1520 is part of Russia’s United Wagon Co., and Uralchem is Unicon’s first customer.
Uralchem-Trans Deputy Director for Transport Operations Alexey Koloshyan said United Wagon Co. sets standards on the rail transport market, and Uralchem-Trans expects its cooperation with its transportation subsidiary will improve the quality of its carrying operations, optimizing cost and delivery times for its goods.
The prompt TSP barge market was heard at $275/st FOB for the week, an increase from $270-$275/st FOB in the previous report.
South Central:
TSP was pegged at $300-$305/st FOB in the Arkansas market and $310-$315/st FOB Memphis. Sources quoted the Caruthersville TSP market at $305/st FOB at mid-month.
Average Industrial Lock delays were quoted in a 14-17 hour range for the week. Twenty-three vessels were counted in line on July 19, with the longest queued for nearly 30 hours. Algiers Lock waits were heard at 3-7 hours, while sources described Calcasieu Lock transits at 3-4 hours.
Ongoing Bayou Sorrel Lock guide wall repairs are scheduled to block weekday navigation from 7:00 a.m. to 5:00 p.m. through Aug. 7. Sources said Bayou Boeuf Lock was also closed to daylight navigation through Aug. 7.
Harvey Lock is scheduled to close on Aug. 1 for dewatering, maintenance, and repairs. Vessels are advised to utilize Algiers Lock as an alternate route. The project is tentatively scheduled to conclude on Sept. 30.
Dredging activities continued in the West Canal, according to a Corps posting, slowing transits through the area. A pair of dredges were described in use between Freeport Harbor and Upper Matagorda Bay (Miles 395-400), near the Brazos River Floodgates, necessitating that boats pass at slowest safe speeds. Sources reported additional dredge work in the San Antonio Bay, scheduled through Sept. 26. That operation was reported to partially block the channel, forcing tows into a singlewide configuration while passing the dredge.
Colorado Lock delays were described at 3-5 hours through both the East and West lock chambers.
Mississippi River:
The Corps reported an average 4-5 hour wait at Lock 14, with wait times for nine-barge tows generally falling in a 5-8 hour range. Lock 20 waits were called 2-5 hours on July 19, while Lock 21 passages were described at 3-4 hours. Shippers reported Lock 22 waits exceeding 10 hours on July 19.
Lock 15 will halt all daytime navigation on July 24-27 for repairs, effectively closing the river. The secondary chamber at Lock 15 is offline through Aug. 3, with delays quoted in an average 5-7 hour range. The Mel Price Lock auxiliary chamber is closed through Sept. 10, and 10-hour waits were reported on July 17-18. Erosion control installation underway at Mile 385 on the Lower Mississippi could trigger sporadic delays, sources warned.
The Corps continues to plan for an imminent restart of the Thebes-area rock pinnacle removal project. Contractors have been waiting since the winter on reduced water levels necessary for work to begin. The Corps has mandated a 15-foot maximum depth reading at the Cape Girardeau gauge as necessary for commencement. National Weather Service forecasts predict a decline to 15 feet on Aug. 1-2. Sources have previously warned of daylight-hour transit restrictions and slowdowns once the project gets underway
Illinois River:
Rising water levels prompted lock operators to lower the LaGrange Lock dam last week, further postponing a 60-day repair effort. The project, originally scheduled to begin June 15, was pushed into early July due to persistent high water. Vessels are able to pass without locking while the dam remains down, but long wait times are predicted when the dam is raised and the project resumes.
Marseilles Lock waits were described as up to seven hours for the week. The Corps pegged average Starved Rock Lock delays at 4-5 hours on July 19. Peoria Lock did not operate for the week, allowing vessels to transit without locking.
Ohio River:
Sources predicted a Lock 52 shutdown starting July 24-25 while lock operators raise wickets at the site. The shutdown is predicted to last 72 hours, followed by additional 12-24 hour delays to clear the traffic backlog when operations resume.
Meldahl Lock waits stretched to 5-10 hours for the week. The primary chamber at Meldahl is offline for repairs through Oct. 2, forcing traffic through the auxiliary chamber instead. The primary chamber at Cannelton Lock is closed through Sept. 18 for repairs and maintenance. Traffic is relying on the auxiliary chamber for passage, however, the Corps warned of intermittent 8-16 hour auxiliary shutdowns.
Greenup Lock repairs were projected to conclude July 21. The lock’s main chamber has been closed to daylight transit since June 5. The primary chamber at Dashields Lock is unavailable for weekday transits between 6:00 a.m. and 4:00 p.m., until Aug. 31.
The Newburgh Lock auxiliary chamber was due to close July 20-24 for equipment unloading, followed by an additional shutdown on Sept. 29-30. The land chamber at Smithland Lock was closed July 18 for equipment unloading. The Belleville Lock main chamber is tentatively slated to close Oct. 2 through Dec. 7 for repairs and maintenance.
Maintenance and repair operations underway at the Tennessee River’s Pickwick Lock were expected to trigger intermittent navigation stoppages on July 10-27. Bridge construction near Fort Loudon Lock concluded on July 15, ending a 30-day period of sporadic transit interruptions. On the Allegheny River, repairs will shutter Lock 4 between Oct. 2 and Nov. 8, closing the river.
Arkansas River:
Dardanelle Lock navigation will be unavailable on Sept. 5-14, 6:00 a.m. through 6:00 p.m., for dive operations.
The Mosaic Co. on July 19 announced that Kimberly Bors has been named senior vice president-Human Resources. Bors succeeds Corrine Ricard, who was recently named senior vice president-Commercial for Mosaic.
Bors will lead Mosaic’s global HR function, and will join the company’s senior leadership team. She has more than 30 years of global business experience across multiple industries in both senior human resources and general management roles. Bors was most recently chief human resources officer for Schneider, North America at Schneider Electric.
Prior to joining Schneider, she held positions at Johnson Controls, IDEX Corp., Brunswick Corp., Outboard Marine, Browning-Ferris, and Pennzoil. Bors holds a B.A. in business administration in organizational behavior and management, and an MBA in finance and management from the University of Houston. She also completed the Women’s Director Development Program at the Kellogg School of Management.
The Fertilizer Institute (TFI) on July 20 expressed support for the nomination of Dr. Sam Clovis of Iowa to be the next Under Secretary of Agriculture for Research, Economics, and Education. TFI also voiced support for the nomination of Indiana Agriculture Director Ted McKinney to serve as the U.S. Department of Agriculture’s (USDA) Under Secretary for Trade and Foreign Agricultural Affairs, a newly created position.
“We believe that Dr. Clovis will work with all stakeholders to ensure that American agriculture has the tools necessary to meet the many challenges ahead, and continue growing the food, fuel, and fiber to feed the world,” said TFI President Chris Jahn. Regarding McKinney’s nomination, Jahn said he will “bring unique experience to this position and quickly prove to be an asset to Secretary Perdue and the entire agriculture community.”
On July 14, TFI voiced support for quick Senate action to confirm Stephen Censky, CEO of the American Soybean Association (ASA), as the next Deputy Secretary of USDA. “American agriculture could not find a stronger advocate in Steve Censky,” Jahn said. “If he is confirmed, his knowledge of the unique opportunities and obstacles facing agribusiness will be a tremendous asset to Secretary Perdue and the entire agriculture community.”
Trammo Inc. reports that it has successfully renewed its revolving credit facility. The $430 million secured facility, with an accordion feature that can permit an increase in total commitments up to $505 million, has been renewed for a period of two years with a syndicate of 10 international banks. Coöperative Rabobank UA, New York Branch, is the administrative and collateral agent, and also serves, together with ABN Amro Capital USA LLC and BNP Paribas, as joint lead arranger and joint book runner.
Trammo said the renewed facility is available for working capital and general corporate purposes to support the company’s commodities trading and distribution businesses around the world. It replaces Trammo’s current credit facility, which was due to expire July 31, 2017.
“Trammo is pleased to have completed the fifth consecutive renewal of its revolving credit facility,” said Trammo CEO Brent Hart. “The renewed commitment from our banking partners allows us to continue to meet the working capital needs of our business and to use our financial strength and flexibility to take advantage of global market opportunities.”
The Southwestern Fertilizer Conference (SWFC) rolled into San Antonio again last week, filling up every square inch of the Marriott River Center and River Walk Hotels, according to SWFC Executive Director Pat Miller. A record 168 suites were reserved.
While actual total attendance was off just a whisker at 1,773 from the year-ago 1,796, Miller said that was due to fewer spouses in attendance. Actual member attendance was up at 1,641. Some 748 companies and 20 countries were represented.
The SWFC named two new members to the Fertilizer Hall of Fame: Harold Trammell, Farmers Fertilizer Co., and Nelson Abell, Abell Corp.
Major industry chatter was heard on the CHS Inc. results (see page 1), possible Agrium Inc./Southern States deal (see page 1), and the pending Potash Corp. of Saskatchewan Inc. and Agrium merger. In addition, there was much talk of crop conditions, particularly the Northern Plains drought, as well as the expected UAN fill program.
New to the event was a morning speaker session with inaugural speaker Amal Deshpande, CEO and co-founder of Farmers Business Network (FBN) (GM Sept. 9, 2016). He detailed the company’s plan to democratize farm information with the goal of creating the largest network of agricultural information in the country and putting it in the hands of farmers, with FBN operating it for them. Farmers supply information, including crop acreage and ag input invoices, to FBN, and for an annual fee of $600 per farmer, FBN shares detailed results back with them. As result, in the ag input field, farmers can use the information to drive down prices.
FBN plans to make inroads in the areas of crop protection chemicals, seed, fertilizer, machinery, and technical services. Deshpande said the company had been particularly successful in the area of credit. He said the company, which is headquartered in San Carlos, Calif., and Sioux Fall, S.D., is also moving into crop marketing.
FBN also has a procurement service, which delivers product to growers, as well as direct pickup from some 11 warehouse locations in Iowa, eastern South Dakota, western Minnesota, northern Montana, and central California.
Deshpande said that while there has been skepticism that farmers would share their information, the company signed up 1 million acres in April. He said the service currently covers some 14 million acres, with nearly 4,000 farms. He said the goal was to sign up 30 percent of the nation’s viable acres within the next 12-18 months.
Deshpande said that major ag consolidation is not beneficial to the farmer, adding that not a single large ag player wants to play with FBN. On the ag input side, to date, most of FBN’s success has been in the areas of seed and crop protection chemicals. He said that once the company has a relevant sample on fertilizer, it will be released. Industry sources noted that in the area of procurement, fertilizer will be harder to tackle since so much is sold in bulk.
While Deshpande sees the service as helping farmers drive down prices, he said farmers want a fair price, not the lowest – i.e., that the service would not necessarily harm the local supplier. “You are not a farmer,” said one attendee at the back of the audience. Another attendee said he could see steam coming out of the ears of some who were hearing about farmers taking photos of invoices and sending them to FBN.
Market sources put the Gulf import market on either side of $50/mt CFR for the week, unchanged from the previous report. Brazil import tons were generally described in a $53-$57/mt CFR range, also flat from one week earlier. Northwest European smelter activity continued to be heard in a $15-$20/mt FOB range.
Tight supply conditions were described throughout much of the U.S. domestic market. Sources put Midwest spot sales at $90-$100/t DEL, with contracts called roughly $10/t below spot. West Coast tons were heard at $110-$120/t DEL, while material sold into the Gulf region was priced at $100-$110/t DEL, unchanged from the prior week.
Chile:
Chilean copper smelter outputs fell by 20.9 percent in May, according to the Chilean Copper Commission, with production totaling 96,600 mt for the month. The sliding outputs capped a period of reduced production for the January-May 2017 period. Chile produced a combined 534,600 mt for the period, an 18.3 percent year-over-year decline. Sources attributed much of lost output to unplanned maintenance outages and inclement weather.
The Chilean acid market was called $40-$45/mt CFR.
Indonesia:
A large number of Indonesian nickel smelters temporarily halted production in June due to falling nickel prices, according to a Reuters report. The production stoppage affected approximately 13 smelters with a combined output approaching 750,000 mt/y.
The closures were blamed in part on the international nickel market registering a one-year low $8,680/mt in June, an approximate 60-percent reduction from the 2014 high of $21,625/mt. Nickel traded at $9,720/mt on the London Metal Exchange on July 19.
Additional smelters began powering down in early July, sources reported, bringing the total number of idled facilities to 17.
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.
