The Mosaic Co. reported on April 22 that it is raising its muriate of potash (MOP) list prices in North America by $15/st, effective immediately. “We have been making significant production cuts to match demand, and we expect near record global shipment in the second-half of 2016,” a company source said.
The announcement follows a similar one made by Agrium Inc. on April 15. Agrium’s $15/st increase on that date resulted in its warehouse postings moving to $245/st FOB most Midwest locations.
United Nations Secretary-General Ban Ki-moon has warned of the risk of “full-scale war” in the disputed Western Sahara region if the peacekeeping mission there is not extended. In a report sent to the U.N. Security Council April 18, he said the Security Council should renew the mandate of the U.N mission to Western Sahara for a further year to avoid hostilities there, according to news agencies that obtained the report. The U.N pulled out most of its international staffers in late March after Morocco demanded they leave because of remarks made by Ban about the disputed territory.
Morocco has controlled most of Western Sahara since 1975 and claims the sparsely populated region as its own. The area is home to OCP SA’s Phosboucraâ phosphate mining operation. Morocco’s annexation of the territory sparked a rebellion by the opposition Polisario Front. The U.N. brokered a ceasefire in 1991, but subsequent talks have failed to find a solution, and the recent incident and the lack of progress on a promised referendum on the status of the region have heightened tensions.
As to the U.N. situation, OCP said its policy is not to provide running commentary on political matters.
The U.N. Security Council is due to vote later in this month on whether to renew MINURSO’s (as the U.N. mission to Western Sahara is known) mandate. Ban warned in this week’s report that “the risk of rupture of the ceasefire and a resumption of hostilities, with its attendant danger of escalation into full-scale war, will grow significantly in the event that MINURSO is forced to depart or finds itself unable to execute its mandate.” The U.N. chief believes that “terrorist and radical elements” would exploit the vacuum resulting from a U.N. withdrawal from the region.
Phosboucraâ’s sales decreased by about 37 percent in 2015, falling to 1.3 million mt of OCP’s Group’s total sales of 25.5 million mt, from 2.1 million and 27 million mt, respectively, in 2014, according to an OCP spokesperson. He cited the main reasons for this decrease in sales as major logistical constraints at the wharf of Laâyoune due to off-and-on extreme ocean swells that led to a complete closure of the wharf for 280 days during 2015. As a result, numerous vessels remained in anchorage for long periods of time, causing some of Phosboucraâ’s shipments to be postponed to 2016, he said.
Linked to this first issue was also the construction of three new berthing dolphins (structures that extend above the water level to protect against vessel collisions with loading facilities) at the loading dock of the Laâyoune wharf. “These logistical constraints pushed certain of our customers to seek alternative supplies from other locations in Morocco (namely from the Khouribga mine) and elsewhere. The alternative volume sourced from Northern Morocco was about 350,000 mt,” the spokesperson said.
Potash Corp of Saskatchewan Inc. and Agrium Inc., were the largest importers of phosphate rock from Western Sahara/Phosboucraâ last year, between them accounting for about 64 percent, according to OCP. PotashCorp received 427,450 mt and Agrium 405,818 mt.
Some companies have opted to not buy Western Sahara rock, namely Yara International ASA, The Mosaic Co., and most recently Lifosa AB, which can now source rock from parent EuroChem.
“PotashCorp. has concluded that the use of phosphate rock from other sources is not a viable option given sensitivities to the particular qualities of the rock source. The company – and its U.S. subsidiary – has consistently adhered to applicable trade and custom laws regarding the importation of phosphate rock. Neither the U.N. nor any other competent legal authority has concluded that the production and use of phosphate rock from Western Sahara is in violation of international law,” according to a statement by PotashCorp. The company believes that PhosBoucraâ’s operations and investments in the region have significantly contributed to the development of Western Sahara and continue to provide substantial and sustainable economic and social benefits to the Saharawi population.
Agrium started importing phosphate rock from OCP in late 2013 for its Redwater plant in Alberta after its Kapuskasing, Ont., mine was shut down due to a lack of rock reserves. An Agrium spokesperson told Green Markets the company does not take a political position on issues related to disputed territorial claims and looks to guidance from the Canadian and U.S. governments before entering into any agreement with may be related to the relevant territory. Agrium said it considers itself a positive influence with regard to OCP’s activities in Western Sahara.
OCP said it has dedicated a significant share of its global investment program to the development of Phosboucraâ, which is not only intended to ensure the long-term sustainability of the mining operations, but also aims at actively promoting the social and economic development of the region. The company in February announced ambitious plans to build new phosphate rock processing facilities and a phosphate fertilizer complex as part of its Phosboucraâ operation (GM Feb. 12, p. 18). The projects are part of the producer’s stated MAD19 billion ($1.95 billion) investment program for the region, which also will include a new wharf and a technology park, including a university.
U.S. Gulf: Prompt granular barges were called $228-$238/st FOB for the week. Moving barges were reported higher. Barges to ship in May were called $210-$225/st FOB.
Prompt prills were reported in short supply, with available product put at $240/st FOB. Tons for two weeks out were called lower at $225/st FOB.
Eastern Cornbelt: Granular urea was unchanged at $275-$295/st FOB in the Eastern Cornbelt, with the upper end inland and the low reported at Cincinnati, Ohio, and other river locations.
Western Cornbelt: Granular urea was pegged at $275-$295/st FOB in the Western Cornbelt, with the low reported in the St. Louis, Mo., market and the upper end in Iowa. “We have seen 2-3 hour lines since Monday at some St. Louis terminals,” said one contact. “But supply is good. Focus is much more on logistics and getting product moved than price.”
Northern Plains: Granular urea had reportedly slipped to $280/st FOB the Twin Cities, down $10-$15/st from late-March pricing levels. Urea pricing in the Dakotas was down as well, with the market in North Dakota quoted at $310-$315/st DEL or FOB, depending on location.
“Expectations continue to be for an above-average run on urea, especially with the possibility of some switching away from ammonia due to some delays,” said one contact. “There remains reluctance to purchase product further ahead of actual demand due to the market structure.”
Northeast: Granular urea pricing in the Northeast was quoted at $290/st FOB Fairless, Pa., and East Liverpool, Ohio, with the upper end of the regional range reported at $305/st FOB Baltimore, Md.
Eastern Canada: Granular urea pricing was quoted in a broad range at $420-$470/mt FOB in Eastern Canada, down $10-$30/mt from last report, depending on location.
China: The strength in the domestic market, along with the MMTC/India urea tender, gives producers more arguments to resist efforts by traders to accept lower prices. In fact, producers are arguing for – and getting – slight price increases in the few export tons being booked.
Prills are pegged at $215-$220/mt FOB, with granular $5-$10/mt higher. Sources said that with the right amount of pressure a buyer could get prilled or granular product at the same price, but it would be in the higher range of prills at best.
Sources said additional demand from the domestic market is prompting more producers to pull material back from the ports. The domestic price is so strong, said one trader, that even the extra transportation cost is easily handled. One source said the domestic price is about $10/mt higher than the top export price.
For many producers the issue is not just making a profit, but rather survival. Many of the older facilities are selling product just at the production cost. For some, the export price already is below their break-even point. Fortunately for many of these plants, local governments arrange for hidden subsidies, such as cheaper utility costs.
Industry watchers said most of the traders who will be participating in the MMTC tender are not taking positions with producers ahead of the tender closing. Many apparently will be putting in their prices, and then, if awarded, will start shopping around for a producer willing to handle the quantity.
As a result of this strategy, said one trader, offers of Chinese material are expected to be limited to one or two cargoes from each trader. No one, the source said, wants to get caught exposed with too many tons and no buyer.
Some sales to Latin America and Australia are helping strengthen global prices, even though the buyers are not specifically looking at Chinese suppliers. The tighter Chinese market is allowing the Arab Gulf producers to either hold firm on their prices or occasionally move up the price.
India: Traders around the world spent the last few days of the week fine-tuning their offers for the MMTC tender.
Sources said the price will determine how many tons the Indians take. Reportedly, there are about 1.2 million tons already on hand once the rains start. Purchases at this time will add to buffer stockpiles, which will ease concerns of farmers and politicians that sufficient urea is on hand.
Industry watchers said the Indians will be looking to the offers backed by Iranian material to lead the way in pricing. The last bit of business reported out of Iran had an Indian West Coast equivalent price of $220/mt CFR. At that level, the Chinese product will have to come down about $15/mt – something Chinese producers are currently loathe to do.
For the Indians, said one source, leading with the Iranian product could be a good move. He noted that Iran should be able to offer 200,000-300,000 mt in this tender. With the large reserves already on hand, buying that amount of tonnage would be enough to ensure a good start of the application season.
The other positive impact the Indians could get by buying only Iranian tons in the first tender is that the next tender will be further away from the influence of the hot Chinese domestic market. Chinese producers will be focusing on exporting their material, and may be more willing to sacrifice selling a few tons at a high price for selling a lot of tons at a lower price.
Middle East: Producers have apparently received more inquiries from Brazil and Australia. These calls, along with the tighter Chinese urea market, gave Arab producers stronger arguments for holding firm against any price reduction.
Sources said the sales into Brazil are coming in with approximate netbacks in the $213-$215/mt FOB range.
Reports that Algeria will start shipping 100,000 mt of granular urea to the U.S. were met with little surprise. Sources said the ending of the European season meant the tons would have to go somewhere. One trader said the large quantity indicates the U.S. still has strong demand for granular urea. He put the onus on cotton and rice producers.
One cargo of 20,000 mt from Algeria handled by Trammo was pegged at $220/mt FOB.
Sources speculated that Iran could be a price leader in the MMTC/India tender. Sales from Iran have gone from $195/mt to $205/mt FOB in the past several weeks. Sources said the latter price reflects a $220/mt CFR or less price into India’s West Coast.
If the Iranian producers agree to this level, sources said the Chinese producers will either be forced to lower their prices by more than $10/mt or sit out this tender.
Latin America: New interest in Brazil apparently prompted new sales. Sources peg the latest price into Brazil at $232-$233/mt CFR, for a netback to the Arab Gulf of right around $215/mt FOB.
Sources said the Brazil interest alone is not enough to move the market because there is plenty of urea available, but a contributing factor is the source and destination of the cargoes. China does not play a major role in eastern South America, but the Arab Gulf, Yuzhnyy, and the Baltics do. Limited spot tonnage from these areas, combined with aggressive producers looking to take advantage of China’s strong market, could be the prime motivator in higher prices.
Sources said the uptick in prices affected a tender by Incofe that was to close late last week. The Guatemalan trader was looking for 15,000 mt of prilled urea, but scrapped the plan because the price was too high for the end users.
U.S. Gulf: Shippers continued to report high-water conditions in the Gulf shipping region. Barge restrictions remained in place on April 20, but were expected to be lifted “by the end of the week.”
Baton Rouge levels slipped below the 30-foot action stage, reading 29.92 feet on April 20, but forecasts called for the gauge to return to action-stage levels on April 24-25. The Natchez gauge read 41.71 feet on April 20 and was expected to rise to 42.7 feet by April 25, above the 38-foot minimum action stage.
Wait times at Algiers Lock were in the 9-10 hour range for the week, with an average six boats queued. Shippers expect Algiers to see greater-than-usual delays through April 30 due to a closure at Harvey Lock, causing the Corps to route vessels through Algiers instead.
Bayou Sorrel Lock delays were quoted in the 7-13 hour range, with an average seven vessels in line to lock. Port Allen Lock waits were noted at eight hours on April 20, and Industrial Lock transit required 24 hours last week, with 28 vessels queued for service. Dive operations closed Industrial Lock during daylight hours on April 18.
Rising levels and fast currents at the Colorado River Locks triggered lock restrictions starting on April 19. Tows were limited to a single loaded barge or two empty barges until the current drops below 2 mph, shippers said. Currents were reported at 4.06 mph on April 20.
Lower Mississippi River: Elevated river levels kept tow restrictions in place last week from Cairo to the Gulf. Southbound traffic was allowed 25 percent fewer barges than usual. Shippers expected the limitations to be lifted around April 23.
The National Weather Service reported Vicksburg levels at 32.31 feet and rising on April 21, below the local action stage of 35.0 feet. A flood warning enacted on April 20 for the Vicksburg area was set to expire April 25.
The Memphis gauge read 15.64 feet and falling on April 21, higher than the previous week’s 12.81-foot reading.
Upper Mississippi River: Shippers reported normal operating conditions along the Upper Mississippi for the week. Sources said Lock 27 delays were averaging 3-4 hours, with Lock 20 passage adding an additional 1-2 hours. Delays at Mel Price Lock was also reported in the 1-2 hour range.
Illinois River: Lockport Lock delays were called 1-2 hours for the week, and wait times at Brandon Road Lock were reported at slightly over an hour. Marseilles Lock navigation required 1-2 hours, and average Starved Rock Lock waits were reported at about 90 minutes.
Dresden Island Lock is scheduled to go offline during daylight hours on April 26, effecting a river closure. Wickets at the Peoria and LaGrange Locks were down last week, allowing tows to transit without locking.
Ohio River: New Cumberland Lock navigation was noted at about an hour for the week, and shippers put Belleville Lock delays in the 1-2 hour range. Racine Lock transits averaged 65 minutes, and transits through Greenup Lock fell in the 1-2 hour range.
Locks 52 and 53 did not operate last week, allowing vessels to transit without locking. Source called wait times 1-2 hours per transit.
The Ohio River gauge at Cincinnati read 28.35 feet on April 20, with forecasts calling for depths to level off around 27 feet by April 25. Cairo levels were 29.02 feet and falling on April 20, up from 28.0 feet one week earlier.
The New Cumberland Lock auxiliary chamber will be closed through May 27. The Corps is scheduled to reopen the chamber April 30 through May 1, and again on May 15-16, to clear waiting vessels.
Navigation through the Louisville area will be unavailable on April 22-23, with miles 602-606 shut down due to Thunder Over Louisville events.
The main chamber at Montgomery Lock is set to close May 16 through June 10, likely causing significant delays, shippers said. The Corps will reopen the chamber on the weekends of May 28-29 and June 4-5 to pass queued traffic.
The Corps closed the Greenup Lock main chamber on April 15 for an extended shutdown. Shippers expect major delays at the site until the projected Sept. 30 reopening date. The auxiliary chamber is slated to remain open throughout the closure.
Emsworth Lock is scheduled to undergo a main chamber shutdown July 5 through Aug. 10. The site’s auxiliary unit will be unavailable during the shutdown. The Corps announced plans to pass waiting vessels on July 16-17 and July 30 31.
“Routine” maintenance at the Tennessee River’s Chickamauga Lock prompted the Corps to warn of intermittent 10-11 hour closures through May 12. The river will close for approximately 24 hours on May 16 due to Eggners Ferry Bridge demolition.
On the Monongahela River, the Braddock Lock and Dam river chamber is closed indefinitely due to equipment failure. Dive operations sparked intermittent closures at the Cumberland River’s Cheatham Lock from April 18-21.
Arkansas River: Webbers Falls Lock maintenance will block upstream access on May 16-22, shippers said. A downstream closure is scheduled to run Aug. 24 through Sept. 11.
Oslo—Yara International ASA said it has signed the transaction documents for the previously announced sale of its European carbon dioxide (CO2) business and its remaining 34 percent stake in the Yara Praxair Holding AS joint venture to U.S.-based Praxair Inc. for €300 million ($340.5 million). The sale was first disclosed in September of last year. The deal also includes an agreement for Yara to supply Praxair with raw CO2 and gas, and to continue to operate three of the CO2 liquefaction units, which are integrated within Yara’s fertilizer plants. The transaction is expected to be completed on June 1, subject to relevant merger control procedures. Yara puts the provisionally estimated post-tax gain at €150 million, including the Yara Praxair Holding sale. Yara and Praxair established the joint venture in Dec. 2007 (GM Dec. 10, 2007).
Yara International ASA reported first-quarter net income after non-controlling interests of NOK2,800 million (NOK10.22 per share), compared with the year-ago NOK729 million (NOK2.65 per share). Excluding net foreign exchange gain and special items, the result was NOK9.14 per share, compared with NOK10.51 per share in first quarter 2015. First-quarter EBITDA excluding special items was NOK5,050 million, compared with NOK5,742 million a year earlier. The year-ago figure also included the results of Yara’s 50 percent stake in the UK GrowHow business, which was later sold to CF Industries Holdings Inc., as well as a NOK929 million impairment on the Lifeco assets in Libya.
“Yara reports strong results in a challenging market environment, even as weaker fertilizer prices and lower deliveries impacted earnings,” said Svein Tore Holsether, president and CEO. “Our operational performance improved compared with the fourth quarter, with both ammonia and finished fertilizer production running at high levels. In addition, lower natural gas cost in Europe continued to improve Yara’s competitive position during the quarter.”
The company said its Crop Nutrition unit had operating income of NOK1,498 million on revenues and other income of NOK19,098 million, down from the year-ago NOK1,578 million and NOK20,761 million, respectively.
Global Yara fertilizer deliveries were 5 percent lower compared with first-quarter 2015, mainly reflecting lower nitrate and compound NPK sales. All regions except Brazil saw lower sales.
In Europe, fertilizer deliveries were 9 percent lower than a year earlier, with nitrate deliveries down 18 percent and NPK compound deliveries down 5 percent. Industrial segment sales volumes were in line with first-quarter 2015.
Yara’s margins declined compared to the first quarter of last year, as realized prices fell more than input costs. Yara’s average realized urea prices decreased around 20 percent, nitrate prices were 15 percent lower, and compound NPK prices decreased on average 12 percent compared with first-quarter 2015. Yara’s average global gas costs were 32 percent lower than a year ago.
Yara said going forward, the global farm margin outlook and incentives for fertilizer application remain supportive overall, and agricultural export profitability in Brazil is higher than a year ago due to currency depreciation. In Europe, Yara expects a catch-up in deliveries during the second quarter, with full-season industry deliveries close to last year’s level. 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 NOK2.2 billion lower than a year earlier.
Yara also said that China’s current FOB urea prices are just above $200/mt and likely close to break-even. It estimated that Chinese urea exports were only 2.1 million mt in January-February, down from the year-ago 3 million mt. However, Yara noted that new capacity has come online in the U.S., Algeria, Saudi Arabia, Iran, and Egypt.
Analysts were also upbeat on the Yara performance, noting that they were an improvement over fourth-quarter 2015 results (GM Feb. 12, p. 14). Fourth-quarter net income after non-controlling interests was NOK434 million (NOK1.58 per share) on revenues of NOK25,722 million.
Santiago—Sociedad Química y Minera de Chile SA (SQM) confirmed April 21 that in minutes of a December board meeting it was indicated that the company was evaluating a lithium production project in Argentina and studying potassium production in the Republic of the Congo. SQM said it is continuously analyzing different alternatives related to the production and sales of its main products, including potential projects in different markets and regions. SQM had no further information to reveal on the Congo project last week. According to Minería Chilena, citing internal company documents, SQM is progressing with negotiations for a potash project in the Republic of Congo. The company is reported to be working with consulting firm McKinsey on the development of its strategic plan, which, according to Minería Chilena sources, includes “making acquisitions or entering into joint ventures in jurisdictions where the company does not currently operate and are related to current or new business areas in which the company believes it can have sustainable and competitive advantages.” In March SQM did sign onto a 50:50 joint venture with Lithium Americas Corp. to develop the Caucharí-Olaroz lithium project in Argentina. There are currently four potash projects under development in the Republic of Congo: Elemental Minerals’ Sintoukola project; Africa Potash’s Lac Dinga project; MagIndustries’ Mengo project; and Holle Potash Corp.’s Tchitondi/Manenga projects. The BFS for Kola was started in August 2015, while African Potash’s Lac Dingo project is at an early stage of development, with the company looking for financing. MagIndustries’ Mengo project has been stalled following a bribery probe in mid-2015. The company had received prior funding from China. The Holle Potash Corp. project is also thought to have stalled after Boost Capital terminated its transaction with the company in February 2014.
Danbury, Conn.—Praxair Inc. said April 19 that it has signed a long-term agreement to purchase by-product carbon dioxide from U.S. Nitrogen LLC, a subsidiary of Austin Powder Co., a leading provider of industrial blasting products and services. Praxair will build, own, and operate a carbon dioxide purification and liquefaction facility at USN’s recently constructed ammonia plant in Tennessee, which is part of a larger vertical integration project. Praxair’s facility will purify by-product carbon dioxide and produce beverage-quality liquid carbon dioxide for distribution and use by customers throughout the Southeastern and Mid-Atlantic regions of the United States. “Praxair’s carbon dioxide liquefaction facility is a welcome addition to our site,” said USN Plant Manager Andy Velo. “Praxair’s presence will capitalize on the substantial investment in local infrastructure made by U.S. Nitrogen over the last several years with the support of both Austin Powder and state and local economic development agencies.” USN told Green Markets April 21 that construction of its complex in western Greene County is nearly complete, and the company is continuing to conduct a phased startup testing of its systems. Production is anticipated to begin by mid-2016. Yara International ASA told Green Markets last week that it continues its discussions with USN on building a small plant at the complex (GM Dec. 16, 2013).
Boise—J. R. Simplot Co. said April 20 that production is ramping up at its new Gal-Xeone controlled-release polymer coating production facility at its Lathrop, Calif., manufacturing complex. The unit is expected to come online later this spring. This is the second facility to produce the product; a Florida facility is run by licensee partner Florikan. When in full production, Simplot said the new capability will not only increase the availability of the Gal-Xeone-coated nutrients, but enable wider distribution and immediate access in-market to western United States and international customers. Simplot said the product is ideally suited for the turf, horticulture, landscape, nursery, and specialty agricultural market segments that are prevalent throughout the western U.S. “Our customers have come to expect high quality, innovative products, and dependable service delivery,” said Jeff Roesler, vice president of Simplot’s Specialty AgriBusiness team. “This production facility gives us flexibility that we have not had in the past.” “We continue to look for innovative opportunities to better serve our customers,” said Garrett Lofto, president of Simplot’s AgriBusiness Group. “When we purchased this technology, it became clear that we needed to expand our production in order to best meet our customers’ demands, and this new production will enable us to do that in the domestic and international markets we serve.” Simplot said Gal-Xeone polymer coating effectively controls nutrient release over an extended period of time – up to 18 months. This technology provides predictable release of plant nutrients throughout the growing cycle, and was developed with the assistance of NASA’s Space Alliance Technology Outreach Program (SATOP).
Riyadh—Saudi Basic Industries Corp. (Sabic) is reportedly looking at strengthening its fertilizer business through acquisitions, as well as its chemicals and polymer businesses, but may sell some assets in its Specialities Plastics unit. According to media reports quoting the Saudi company’s acting CEO, Yousef Abdullah al-Benyan, Sabic wants to strengthen both its own and affiliate Saudi Arabian Fertilizer Co.’s (Safco) fertilizer businesses. In the case of Safco, it is understood this may include seeking investment opportunities outside of the Kingdom for nitrogen and speciality urea products. Sabic owns a 42.99 percent interest in Safco. As part of Sabic’s review of investments, the sale of its 50 percent stake in ammonia and urea producer National Chemical Fertilizers Company (Ibn Al-Baytar) to Safco (GM March 25, p. 14), and other moves are are reportedly being assessed. Safco is Sabic’s joint-venture partner in Ibn-Al-Baytar, which also produces compound and liquid fertilizers. Sabic extended its earnings’ slump in the first quarter, reporting a 13 percent decline in net profit to SAR3.41 billion ($908.9 million) in the three months to March 31, 2016, down from SAR3.93 billion in the same year-ago period. The company attributed the profit fall to lower average sales prices. Safco also extended its earnings’ slump in the first quarter, reporting a 51 percent fall in net profit of SAR286 million ($76.2 million) in the first three months of 2016, down from SAR590 million a year ago. The company cited lower selling prices for the first-quarter decline in profit, although this was partly offset by an increase in quantities sold.
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