All Posts from July 22, 2013

Ammonium Nitrate

Ammonium Nitrate, Market Watch, U.S. Gulf, Western Cornbelt

U.S. Gulf: Ammonium nitrate barges continued to be called $325-$330/st FOB, but sources said a forthcoming import vessel may soon test these numbers.

While some pointed to near-term interest in AN for pastureland, others said some players are still scratching their heads over whether they want to continue to offer the product, citing the recent lawsuits and liability issues coming in the wake of the West, Texas, explosion.

Western Cornbelt: Ammonium nitrate remained in the $390-$400/st FOB range in the Western Cornbelt, with the Tulsa market pegged at the $380/st FOB mark.

TCP urea tender shows $20/mt drop in price

Breaking Industry News

The Trading Corporation of Pakistan (TCP) on June 22 closed its urea tender for 300,000 mt with prices lower than expected. The lowest offer came from Swiss Singapore at $317/mt CFR for 50,000 mt. There were two additional offers for a total of 125,000 mt below $320/mt CFR. In the run-up to the tender, industry sources were predicting offers in the mid-$320s/mt CFR.

Sources report that the tender was quickly awarded to Swiss Singapore. In general, the laws governing TCP purchases do not allow the buying house to negotiate with the other offering companies.

Because TCP was authorized to buy 300,000 mt in a “gallop” tender, the company will most likely call another tender for the remaining 250,000 mt. Under the general rules of operation, the tender will close at least one week after the announcement. The earliest TCP could close a tender is July 30.

In the last tender (GM June 10, pp. 7-8), TCP paid $337/mt CFR after a series of controversial moves that had the company first rejecting and then accepting the lowest offer of $335/mt CFR. In the end, however, the lowest priced offering company had already released its tons and declined the award.

The Swiss Singapore offer confirmed the thinking of many in the industry that there is a large overhang of Iranian product looking for a buyer. Swiss Singapore regularly handles Iranian urea product for export. Sources say there is about 500,000 mt in Iran with no home. This material and the nearly 2 million mt in the Chinese ports ready for export are expected to keep urea prices soft.

The next test of the market will be the IPL tender in India that closes July 26. If TCP calls another quick tender, it will not be able to close until a few days after the Indian deal is done. The Pakistan buying house could find itself paying higher rates for its next installment of urea.

Audit finds DOE risk, lack of documentation for HECA coal-to-nitrogen plant

News

A recent audit by the U.S. Department of Energy’s Office of Inspector General of DOE’s participation with the Hydrogen Energy California (HECA) Project, Fresno, has found that a 2011 modified agreement by DOE represents a substantial increase in upfront risk to DOE, allowing HECA to substantially decrease its cost share in the early stages of the project. The audit found DOE is at risk of expending $133 million for its share of project costs in the first phase without it being completed if the recipient is unable to obtain funding for the next project phase.

The audit also found that in assessing the 2011 modification, DOE relied on financial projections that were not always fully supported by documentation. This spanned the gamut, in areas including operations, maintenance, insurance, property taxes, and interest rates. The audit said DOE officials did not agree with the audit’s concerns over lack of supporting documentation for financial projections, saying the level of review for the modification was likely as good for the modification, if not for the review for the original award.

The audit provided suggestions to ensure similar situations do not recur and improve the management of cooperative agreements.

HECA arose out of the American Recovery and Revinvestment Act of 2009, when the DOE’s Office of Fossil Energy received $3.4 billion to focus on research, development, and deployment of clean coal technology. In September 2009, DOE approved an award with a government contribution of $308 million to HECA to construct a commercial power plant to demonstrate the capture and underground storage of carbon dioxide. The project was expected to be completed in November 2018 at a cost of $2.8 billion.

In March 2011, after DOE and HECA had spent $75 million, HECA’s original recipients, BP and Rio Tinto, notified DOE they intended to terminate the agreement because the project did not meet their requirements for economic viability. With the DOE’s assistance, HECA found new owners, SCS Energy California, that believed the project could be economically viable. In September 2011, DOE modified the cooperative agreement and increased total project cost to approximately $4 billion, with DOE cost share of $408 million.

The audit said the project is progressing, though at an increased risk level for DOE. It noted that DOE officials maintain the risk is reduced as fertilizer production has been added as a second revenue stream. HECA, which would be located in western Kern County, would generate a total net output of up to a nominal 300 megawatts (MW), make up to 1 million st/y of nitrogen-based products, and capture a stream that is comprised primarily of carbon dioxide (C02) and transport it by pipeline to a neighboring oilfield for enhanced oil recovery (EOR) and sequestration (GM Dec. 31, 2012, p. 1). The audit agreed that the fertilizer component is potentially a positive step. HECA officials had not returned calls at presstime.

The Week in Fertilizer Stocks

Fertilizer Stocks

The Week in Fertilizer Stocks

Producer Symbol Price Week Ago Year Ago
Agrium AGU 89.33 93.34 95.77
CF Industries CF 182.96 187.55 206.22
CVR Partners UAN 22.56 23.35 24.84
Intrepid Potash IPI 19.16 19.37 23.98
Mosaic MOS 54.03 56.85 58.15
PotashCorp POT 38.30 39.86 45.84
Rentech Nitrogen RNF 31.58 29.06 29.94
Terra Nitrogen TNH 219.40 219.53 215.24
Distribution/Retail
Andersons Inc. ANDE 57.85 55.60 38.00
Deere & Co. DE 83.66 84.25 75.66
Scotts SMG 50.01 50.09 39.19

Lackluster P&K prices lower Mosaic results, offsetting record K and strong P volumes

Featured, News

The Mosaic Co. says lackluster potash and phosphate prices offset record potash and strong phosphate volumes for the fourth quarter ending May 31, 2013. Net income was $486 million ($1.14 per diluted share) on sales of $2.7 billion, compared to the year-ago $507.3 million ($1.19 per share) on sales of $2.8 billion. Operating earnings were $621 million, down from the year-ago $671 million.

"Our focus on planning and execution paid off, with Mosaic achieving record potash and strong phosphate shipments during the quarter," said Mosaic President and CEO Jim Prokopanko. "Mosaic delivered outstanding results despite difficult external factors such as the late and compressed North American spring planting season, and additional logistical challenges. The long-term outlook for Mosaic remains compelling, and we are executing well to capture the opportunity."

For the year ended May 31, net income was $1.89 billion ($4.42 per share) on sales of $9.97 billion, compared to the prior year’s $1.93 billion ($4.42 per share) and $11.1 billion, respectively. Full-year operating earnings were $2.2 billion, down from $2.6 billion a year ago.

Record K tons due to international market

Fourth-quarter potash gross margins were down at $489 million on sales of $1.03 billion from the year-ago $514 million and $1.04 billion, respectively. Operating earnings were $445 million, down from $464 million.

Record potash volumes of 2.57 million mt were due to a surge in the international market, with China, India, and Brazil all in the market during the first half, compared to year-ago volumes of 2.05 million mt. While the average potash realized price was $368/mt, down from the year-ago $455/mt, the international price – though mainly standard product – still remained lower than North American at $328/mt versus the year-ago $403/mt. North American was $415/mt, down from $498/mt. Production volumes were at 95 percent at 2.51 million mt, up from the year-ago 1.94 million mt or 85 percent.

Full-year potash margins were $1.61 billion on sales of $3.53 billion, about even with 2012’s $1.62 billion on sales of $3.3 billion. Operating profits were $1.39 billion, down from $1.46 billion.

Fourth-quarter phosphate margins were $290 million on sales of $1.67 billion, down from the year-ago $322 million and $1.79 billion, respectively. Operating earnings were $198 million, down from $224 million.

Fourth-quarter phosphate volumes were $2.94 million mt, up from the year-ago 2.89 million mt, with international and domestic fertilizer sales remaining about level year-to-year. The average DAP price fell to $483/mt from the year-ago $494/mt. Production was about level at 2.05 million mt, or 85 percent capacity, versus the year-ago 2.08 million mt, or 86 percent.

Sulfur, with the average market price at $152/lt for the quarter, was down from the year-ago $175/mt. Phosphate rock prices were down due to South Fort Meade Mine’s return to full production. While ammonia prices were up at $598/mt versus the year-ago $485/mt, they have been working their way down in recent months.

Full-year phosphate margins were $1.16 billion on sales of $6.5 billion, down from $1.47 billion on sales of $7.84 billion. Operating earnings were $848.1 million, down from $1.18 billion. The company said full-year sales of its MicroEssentials specialty product were up 28 percent.

Price weakness to moderate, says Prokopanko

“With near-record crop nutrient affordability, we anticipate continued strong demand for the remainder of calendar 2013, while generally cautious distributor behavior and a strengthening U.S. dollar will impact prices,” said Prokopanko. “We expect the current price weakness to moderate over time, as demand growth absorbs the additional supply of ph

Yara 2Q income off 33 percent, lower prices cited

News, News Briefs

Oslo — While Yara International ASA reported a surge in second-quarter sales volumes, lower prices offset those to spur a drop in net income after non-controlling interests to NOK1,865 million (NOK6.68 per share) on revenues of NOK23,190 million, down from the year-ago NOK2,787 million (NOK9.82 per share) and NOK21,423 million. While the total sales volumes were up at 8.12 million mt versus 7.1 million mt, Yara noted that global urea prices declined almost 30 percent – $342/mt FOB Black Sea versus the year-ago $471/mt – while value-added fertilizer prices were broadly in line with a year ago. Total sales volumes of urea were 1.97 million mt versus 1.49 million mt. NPK and nitrates also saw significant volume increases, while ammonia was off at 790,000 mt from the year-ago 902,000 mt. Six-month net income was NOK4,120 million on revenues of NOK43,879 million, versus the year-ago NOK5,795 million and NOK42,726 million, respectively. Six-month volumes were 15.2 million mt, up from the year-ago 14.4 million.

Airgas NH3 truck leak shuts down Arkansas Walmart

News, News Briefs

Hope, Ark. — An anhydrous ammonia leak in an Airgas Inc. tanker-truck parked overnight July 16 in a Walmart parking lot in Hope, Ark., caused evacuation of the store from 10:00 p.m. to 11:30 a.m. the following day and closed at least two nearby businesses, according to the Arkansas highway police. A Walmart employee rounding up shopping carts noticed it and called the state police about 10 p.m. The next morning the ammonia was off-loaded into another tanker and the leaking unit was moved to the airport for a closer inspection and repairs. The tanker had been on its way to a Southwestern Electric Power Co. plant in Fulton.

CHS files to offer stock

News, News Briefs

St. Paul — CHS Inc. announced July 18 that it has filed a Registration Statement on Form S-1 with the Securities and Exchange Commission in anticipation of a proposed public offering of Class B Reset Rate Cumulative Redeemable Preferred Stock (stock). The number of shares to be offered and the initial dividend rate applicable to the stock have not yet been determined. The SEC filing has not yet become effective, and the shares of stock to be registered may not be sold, nor may offers to buy be accepted prior to the time when the statement becomes effective. CHS said it has not yet determined with certainty how the proceeds would be used, with management having broad discretion. However, items mentioned included acquisitions, a replacement coker at one of its refineries with a total cost of $555 million and expected completion in fiscal 2015; or funding a $327 million expansion at its McPherson, Kan., refinery. Not mentioned at this stage was the proposed nitrogen plant in Spiritwood, N.D.

House passes contentious Farm Bill

News, News Briefs, Triple Superphosphate

Washington — House Republicans on July 11 passed a Farm Bill that would end direct subsidy payments to farmers, replacing those payments with a federally subsidized crop insurance program. The House bill diverged dramatically from the Senate bill passed in June, however, by cutting funding for food stamps entirely, with House Republicans promising instead to take up the Supplemental Nutrition Assistance Program in a separate bill. The measure passed with a 216 to 208 vote, with no House Democrats supporting it and 12 Republicans also voting against it. The House bill also makes cuts to conservation programs while proposing radical changes to federal agricultural policy by making some commodity subsidies permanent instead of expiring every five years. While some supporters lauded the House measure as a “farm only” bill that cuts wasteful spending on food stamps and renewable energy, the legislation had far more detractors, with pointed criticism coming from both the Left and Right. The conservative magazine The Weekly Standard labeled it a “fiasco,” saying the bill “gets almost everything wrong” by “outspending both the Democratic Senate and the profligate Obama White House” with “tens of billions of dollars in subsidies to agribusiness interests.” Politico summed up its opinion of the bill with a simple four-word headline: “Worst. Farm bill. Ever.” House Republicans were also criticized for tactics used to bring the bill to the floor, including adopting an “emergency” rule in a late-night session before the July 11 vote that governed debate on the bill and closed it off to any amendments, and introducing the 608-page legislative text to other House members just 10 hours before the vote was called. Conference committees will now go to work on reconciling the House and Senate bills, but lawmakers face an uphill battle. The Senate’s version of the bill, passed on June 10, would reauthorize many of the nation’s food and agricultural programs while reducing spending by roughly $24 billion over 10 years through cuts to farm subsidies, reduced food stamp funding, and consolidating conservation programs (GM June 17, p. 11).

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