Saskatoon—Some 114 workers at the Potash Corp. of Saskatchewan Inc.’s Allan Mine in Saskatchewan are safe after an underground mine fire occurred on a scoop loader Dec. 19, according to the company.
While the fire, which was reported around 3:30 p.m., was quickly extinguished, the heavy smoke required the workers to go to refuge stations. Once the smoke cleared, worker evacuation began after 9 p.m. and concluded at approximately 12:30 a.m. No injuries were reported, and the mine reopened Dec. 20.
U.S. Gulf: Granular prompt urea prices continued to move up last week, with trades put at $232-$242/st FOB, up from the prior week’s $224-$236/st FOB. January trades were called $236-$240/st FOB. Sources reported a fair amount of activity.
Inquiries to CF and Iowa Fertilizer went unanswered about the status of their respective new production at Port Neal and Wever, Iowa. Both companies had expected ammonia production to start up early in December (GM Nov. 23, p. 1), with downstream production soon to follow. Industry watchers have been skeptical about the plant start times, however, and some said the fertilizer year-to-date 1.2 million st deficit in urea imports is prodding urea prices upward.
Prills were also higher at $230-$238/st FOB, up from the week-ago $227/st FOB.
Eastern Cornbelt: Granular urea fill tons were quoted in the $255-$265/st FOB range out of spot river locations in the Eastern Cornbelt, with the upper end pegged at the $270-$275/st FOB level out of inland terminals.
Western Cornbelt: The granular urea market continued to be quoted at $255-$275/st FOB in the Western Cornbelt, with the lower end reported in Missouri and the high in Iowa on a spot basis.
California: Granular urea pricing in the California market was quoted at $300-$320/st FOB port terminals, with the upper end of the FOB range reflecting a $10/st increase from last report. Delivered urea continued to be pegged in the $320-$330/st range in the state.
“I would expect to see all nitrogen prices move up even more early in the new year as the reality of delayed North America production and significantly stifled Chinese production hits the market,” said one regional contact.
Pacific Northwest: Granular urea was quoted at $295-$315/st FOB in the Pacific Northwest depending on location, with the upper end of the range reflecting another $10/st increase from last report. The market FOB Rivergate, Ore., was pegged in the $295-$305/st range.
Delivered urea had reportedly firmed to $335/st in the region for either truck or rail, up $5-$15/st from early December levels.
“I’m not sure where all the bears went, (because) the bulls are definitely leading the charge now,” commented one regional source.
Western Canada: The granular urea market in Western Canada had reportedly firmed to $455-$465/mt DEL for prompt and January tons, with reports of February/March shipments being offered at the $465-$470/mt FOB level from some suppliers. Sources confirmed spring prepay offers for tons shipped from April through June in the $475-$480/mt DEL range.
There were reports of at least one regional supplier coming out with spring prepay urea initially at the $490/mt DEL level, but, as one source put it, that level “might have been too steep,” because discounted offers quickly followed that were $10-$15/mt below that number.
China: Export product is scarce. Sources said the combination of reduced production and domestic demand is making it difficult to find bargains for international sales.
The inventory is being controlled more by the reduced production – still less than 50 percent of rated capacity nationwide – rather than new demand. Sources said there has been no big change in demand compared to this time last year.
Prices remain in the upper $240s/mt FOB. If asked, however, producers will offer at $250/mt FOB. One trader commented that the high offers handle two situations at once. If a buyer is desperate, he will accept the higher price and the producer will pocket a nice profit. If the buyer is just shopping around, the higher price will cause him to back off until the global situation changes.
Sources do not expect to see many plants re-opening in 2017. The strong emphasis that Beijing has on cutting pollution has forced a number of older plants to shut down. There is no indication the Beijing authorities will ease up on their pollution standards in the coming year.
At the same time, authorities appear to have shifted their emphasis on urea production to ensuring that domestic demand is fully covered, and only then will they look at exports. This is a shift from recent years, when China made sure domestic demand was met, but also sought to be a major player in the international urea market.
One trader said if production remains at current levels, the domestic demands will indeed be met with a few tons for export. If national production increased to 70 percent of rated capacity, said one observer, there would be a glut of product that could only be satisfied with lower prices offered on the international market.
There is still no official word from Beijing about export duties. The constant refrain in the rumor mill is that the 80 yuan/mt export duty will be dropped. One contrarian noted, however, that dropping the tax would encourage exports, something Beijing no longer sees as important.
In the past, Beijing would reveal its export tax intentions by this time of year, and industry insiders in the country would pass on the mainstream thinking to their international partners. This year, however, international traders are getting nothing from their Chinese teammates about what will happen on Jan. 1.
India: Traders who were once sure that India would need to call a tender in January are now saying they are not so sure it will happen.
Sources agree that India needs 500,000-600,000 mt to close out their buying plan for the fiscal years that ends in March. Some traders, however, are beginning to wonder how much of that tonnage is really needed and how much is for political cover.
There is a general view that calling a tender in early January would not make much sense. Supplies are limited, and prices are refusing to come down after the scrapping of the STC tender earlier in December. The first half of January is not expected to be much better in terms of supply and price, said one trader. By the end of January, however, producers will have built up reserves that could push prices down to levels more to the liking if Indian buyers.
If a tender is called, traders said the date and terms of delivery will tell a lot about the real needs in the country. Sources expecting a tender said the terms will most likely include limited tonnage and specific ports, most likely all on the West Coast.
If the tender is called in the first half of January, sources said that could mean the country really needs tonnage in specific areas to close out the current application season. If the call is made later in the month, however, sources speculated that the incoming tonnage will be to build reserves for the next season.
One other option might drive a tender call, said sources. Urea is a political hot potato in India because it is the cheapest input available to farmers, thanks to subsidies. If farmers perceive that there is not enough urea on hand, they complain to their members of parliament. From there the complaints take on a political nature that, in the past, has prompted immediate urea tender calls.
Middle East: Sources reported that the tightness in the Arab Gulf will most likely end with the new year. Plants that have been on extended maintenance shutdowns are beginning to slowly come back online.
For now, however, Arab producers are asking $250/mt FOB. Spot business is pegged closer to the mid-$240s/mt FOB, and contract sales for considerably less. One trader said Arab producers can get away with asking such a high price because of the temporary tightness in the region.
Sources reported one possible sale at $250/mt FOB out of Oman for January, but none could confirm the deal. One trader said that if such a deal did take place, it is most likely for an early January loading and is needed to fulfill a sale that was to have been supplied from a different location.
Soon after STC/India scrapped its tender, sources were expecting the regional price to drop as product from Iran and Oman went homeless. Sources now report, however, that all the tonnage slated for India has been snapped up at better netbacks than an India purchase would have allowed.
After sales last week by Egyptian producers at $242/mt FOB, the Egyptian market has gone quiet. Sources reported some discussion of prices moving past $245/mt FOB, but could not point to any business done at that level. One trader said it would be natural for producers to push on prices. He added, however, that it is also just as natural for buyers to push back.
Egyptian and Arab Gulf sales have benefited from growing demand in the U.S. by traders betting that new urea production will not come online in time for the spring application season. Likewise, European demand has also been strong, giving producers multiple ports of entry for their product.
And finally, Australia seems to be in a buying mood. Sources reported that good rains have prompted buyers to talk to their Arab Gulf partners about stepping up shipments.
Southeast Asia: Indonesia is shipping out the last of its tonnage for the year. Sources noted that the cargoes were all booked before the price of urea started it climb.
Sources said some of the cargoes being loaded now were supposed to have gone out much earlier. The delays were put off to berth congestions and bad weather.
The government and industry leaders are now looking at the 2017 export allocations and pricing ideas. Expectations remain that Indonesia will export at least 1 million tons next year.
Malaysia continues to have trouble with its newest plant, with sources reporting that the facility is running at 80 percent of capacity. However, sources said the bugs seem to have been worked out, and the plant should be at full production in January.
The increase in production from Malaysia will be good news for buyers in Thailand and New Zealand.
Black Sea: Sources reported no new business out of Yuzhnyy. Prices are expected to remain stable well into January.
U.S. Gulf: Industrial Lock reopened last week following more than four months of repair and maintenance operations. Sources quoted delays in the 6-10 hour range for the week, with East Canal navigation further delayed by sporadic fog and high winds. Algiers Lock waits were called up to six hours, with passage through Port Allen Lock requiring three hours, shippers said.
West Canal transit was restricted to overnight navigation at the Galveston Railroad Bridge (Miles 357-358), where dredging and debris removal was underway between 7:00 a.m. and 7:00 p.m. on a 12-day on, two-day off schedule. In addition to overnight transit, vessels were free to pass on non-work days.
Waits were noted up to four hours at Brazos Lock. Pipeline dredging at the Brazos River Floodgates, previously expected to wrap up on Nov. 11, has been extended indefinitely, the Corps said.
Lower Mississippi River: With river levels forecast to rise after Christmas, some shippers reported looser navigation restrictions heading into the holidays. Tows had been limited to 35 barges since Nov. 30. The Baton Rouge gauge read 12.14 feet on Dec. 20, with levels expected to rise precipitously starting on Dec. 28-29.
The Stack Island dike project continued to slow transits through the Lake Providence area. Vessels have been asked to run at the slowest safe speeds while efforts are underway, estimated through Feb. 10 at the earliest.
Upper Mississippi River: Freezing conditions and ice formation were reported on Dec. 14-20, stifling flows and drastically reducing navigable river depths. The National Weather Service reported St. Louis levels at 1.03 feet on Dec. 20, while forecasts called for depths to remain below the two-foot mark through at least Jan. 2, 2017.
Icy conditions at Mel Price Lock and Locks 24, 25, and 27 prompted immediate navigation restrictions, effective until further notice. No width restrictions had been levied as of Dec. 20, but shippers warned they were likely in the short-term. The Mel Price Lock main chamber is scheduled to close Jan. 17-25 for maintenance.
Main chamber repairs that began on Dec. 15 at Lock 21 will run through Feb. 28, with tows subject to length and width restrictions during that period. Lock 22 will also be without a working tow haulage system on Jan. 2-24, with length and width restrictions enforced at that lock as well.
Despite falling river levels, the Corps’ annual rock removal project near Thebes, Ill., has been postponed until January 2017 at the earliest, sources said. Vessels will face daily daytime-hour transit slowdowns and restrictions when the project begins.
Illinois River: Heavy ice formation triggered navigation restrictions throughout the Illinois Waterway last week. The Corps announced a mix of length and width restrictions, tug-assist requirements, and one-way transit procedures to cope with the conditions. Sources described 5-10 hour delays at the LaGrange, Peoria, and Starved Rock Locks.
Ohio River: A leaking hydraulic line at the Ohio River’s New Cumberland Lock continued to slow transits. Rather than close the lock for an estimated six weeks of repairs, the Corps plans a temporary hydraulic bypass to return the lock to full operation, which is expected to require approximately two weeks. Crews have pledged to operate the lock by hand until work is completed, pushing delays to an average of five hours.
Locks 52 and 53 did not operate for the week, and instead allowed vessels to pass without locking. No waiting was reported at Lock 52, but congestion pushed Lock 53 waits to as high as 10 hours.
The R.C. Byrd Lock’s auxiliary chamber is closed for repairs through Jan. 30.
The Allegheny River’s Lock 6 remained impassible due to a hydraulic leak and equipment failure. With no auxiliary chamber available, transit on the river has been effectively shut down, sources said.
High water shuttered the Monongahela River’s Lock 3 over the weekend. Shippers expected the lock to reopen on Dec. 19. The Braddock Lock and Dam river chamber was closed due to equipment failure, leaving the land chamber as the sole option for transiting the lock.
U.S. Gulf: Sulfuric acid market players generally put price ideas for Gulf import vessels at $40-$45/mt CFR, flat from the previous report. Claims of tight supply from producers provided little leverage to prospective buyers, some argued. Offers for acid shipped from Northwest Europe were called $5-$10/mt FOB. Brazil imports continued to be reported in the $40-$50/mt CFR range.
In the domestic markets, sellers described sales into the Midwest at $80-$85/mt DEL, with material destined for the West Coast reported at $105-$115/mt DEL. Tons earmarked for U.S. Gulf-region delivery were called $85-$90/mt DEL.
Chile: South American copper miner Corporación Nacional del Cobre de Chile (Codelco) plans to build two new sulfuric acid production plants in Chile, multiple reports indicated. SNC-Lavalin was awarded the EPC contract to build both facilities.
The factories will replace two acid plants currently in operation at a mining site in northern Chile, employing technology from Dupont-subsidiary MECS Inc. to process off-gas from the Chuquicamata Copper Smelter Complex, SNC-Lavalin said in a press release.
The plants are each expected to boast a 2,048 mt/d operating capacity. Construction is slated to begin in early 2017.
Sources called price ideas for sulfuric acid imported to Chile in the $50-$60/mt CFR range, unmoved from the previous report.
Damietta, Egypt—Germany’s Thyssenkrupp Industrial Solutions has supplied and recently commissioned Egypt’s largest nitrogen fertilizer complex. The plant, located in the Damietta free-trade zone, will be operated by Egyptian Nitrogen Products Co. (ENPC), a wholly-owned subsidiary of Misr Fertilizer Production Co. (MOPCO).
When fully ramped-up, the plant will be capable of producing 2,400 mt/d of ammonia and 3,850 mt/d of urea. ENPC contracted Thyssenkrupp in 2007 to build the turnkey facility. The two ammonia lines are based on Thyssenkrupp’s proprietary ammonia process, while the two urea lines will use Stamicarbon’s process. Market sources said additional tonnage on an already volatile market may put even more pressure on prices.
U.S. Gulf: Most players continued to call NOLA prompt potash barges in the $200-$208/st FOB range. In the meantime, producer quotes were called $208-$215/st FOB.
Eastern Cornbelt: The potash market was quoted at $245-$265/st FOB in the region, with the upper end reflecting a spate of new postings from producers. Following the mid-month announcement from Mosaic that it was raising its potash prices by $20/st after Dec. 16, Agrium announced that it was also hiking its potash prices across all zones by $20/st, effective Dec. 22. PotashCorp was matching that price increase as well, sources said, with rail-DEL tons quoted at a $5/st premium to the FOB warehouse level.
Western Cornbelt: Potash pricing was up in the Western Cornbelt, fueled by a $20/st pricing hike from the three big Canadian producers. Sources quoted the regional warehouse market at $245-$265/st FOB, with the upper end reflecting the new reference level. One Iowa source pegged the warehouse market in his location at the $255/st FOB level at midweek.
Intrepid is raising its posting for 60 percent granular potash to $265/st FOB Carlsbad, N.M., up $15/st from the previous level.
California: The California potash market had reportedly firmed to $370-$380/st FOB, up some $20/st from last report, but sources said at least one producer raised the price further on Dec. 21 to the $400/st FOB level out of warehouses in the state. Rail-DEL tons were pegged in the $385-$405/st FOB range in California.
Sulfate of potash (SOP) was unchanged at $580-$590/st FOB in the state, with rail-DEL tons quoted at the $595/st level in the Central Valley.
Crystalline potassium nitrate remained at $830/st FOB for bulk tons and $920/st FOB for 50-pound bags.
Pacific Northwest: The regional potash market had reportedly inched up to $345-$365/st DEL in the Pacific Northwest, with warehouse prices reported in roughly the same range.
The sulfate of potash (SOP) market was steady at $560-$570/st FOB in the Pacific Northwest.
SOP Magnesia remained at $302-$322/st FOB regional terminals.
Western Canada: Sources reported laying in some potash tons in December in the $310-$320/mt FOB range out of Saskatchewan mines, but producers were touting winter fill levels in the $330-$340/mt FOB range for new business.
Jordan: Arab Potash Co. (APC) and Sinochem Macau signed a Memorandum of Understanding (MOU) on Dec. 18 covering the supply of potash from Jordan to China for 2017-2019. The MOU details the annual quantities, which are expected to be about 2.6 million mt in total, APC said.
The deal is a continuation of a three-year potash supply agreement signed in September 2013 between APC and the Sinochem Group that appointed Sinochem Macao as the exclusive channel for all of APC’s potash sales to China for the years 2014 through 2016. The price and firm volumes to be supplied in 2017 will be negotiated as part of the regular annual potash contract.
Belarus: Belaruskali has not commented on its planned maintenance program, which is now expected to take place during the first quarter of 2017. Earlier, the producer had planned 10-14 day maintenance shutdowns at three of its mines in December, January, and February. Belaruskali’s operational capacity is reported at 12.6 million mt/y, or around 1.05 mt/month. It is reported to be fully committed through the end of January.
Belarus intends to export about 10 million mt of potash in 2017, the Belarusian news agency Belta reported on Dec. 21, citing the country’s Deputy Prime Minister Mikhail Rusy. Rusy said contracts had been signed, and that demand was solid. Belarus expects its potash exports this year to exceed 9 million mt.
Germany: K+S said on Dec. 21 that repairs have been completed following the fire damage at its Hattorf site, and “in technical terms” the facilities are now ready for operation. The company said, however, that the resumption of production after months of short-time working, as originally had been planned, is not possible due to persistent low water levels in the Werra River, which is expected to continue over the coming days.
As a result, short-time working at the Hattorf site is being continued. Epsom salt production at Hattorf, which was not affected by the fire, is continuing as well. The two other Werra plant sites, Wintershall and Unterbreizbach, are also continuing to operate.
India: Domestic sales of potash for direct application for the four-month period through November were around 27 percent higher than in the same year-ago period, increasing to 1.275 million mt from 1 million mt, according to Department of Fertilizer (DOF) data.
Sales were up around 10 percent fertilizer-year-over-fertilizer-year, reflecting healthy retail movement. As previously reported, imports of direct application potash this fertilizer year by the end of November were marginally up from the same year-ago period, at 2.589 million mt compared with 2.572 million mt for April-November 2015, according to DOF data.
Nepal: Agricultural Inputs Co. Ltd. closes a tender on Jan. 2, 2017, for the supply of 7,500 mt of potash in bags for delivery on a CIP Nepal basis (Biratnagar, Birgunj, and Bhairhawa AICL warehouses) within 90 days of l/c opening. Bids are to remain valid for 21 days after tender closing.
Tampa: Speculation on a potential landing spot for the first-quarter Tampa molten sulfur contract remained steady last week, with most sources expecting a $10/lt DEL or larger increase from the fourth-quarter $69.55/lt.
Strengthening in a number of international markets was cited as a basis for any potential domestic increase. China has reported sales above $100/mt CFR in consecutive weeks after buying in the high-$80s/mt at the start of the fourth quarter, while Middle East suppliers Aramco, ADNOC, and Tasweeq have increased prices by an average $15/mt over the same period.
The U.S. Gulf export market, a traditional indicator for Tampa, continued to cast a shadow over Tampa, however. Last-done in that market has lagged Vancouver spot by $15/mt or more, a disparity that some believe augurs poorly for first-quarter molten.
However, some have argued against viewing the Gulf’s relative price weakness as a measure of market sentiment, claiming that pricing is expected to increase markedly in the next round of business.
Negotiations will begin in January, sources said.
BP Plc announced the early completion of a “major” maintenance project at its 413,500 barrel/d Whiting, Ind., refinery, the Northwest Indiana Times reported. A number of intermittent production cuts were reported during the project, which BP called one of the largest in the refinery’s 127-year history. An announced oil blending unit shutdown, which was believed to be the final task of the project, was previously scheduled to run through January 2017.
Domestic refinery utilization rose last week, according to data released by the U.S. Energy Information Administration (EIA). Refinery runs were tabulated at 91.5 percent for the week ending Dec. 16, an increase of 1.0 percent from the prior week’s 90.5 percent and also higher than the year-ago 91.3 percent, but behind the five-year average of 91.9 percent.
Crude inputs also rose, the EIA said. Refiners processed an average of 16.658 million barrels/d, a 184,000 barrel/d increase from the 16.474 million barrels/d rate reported one week earlier.
U.S. Gulf: Sources called last-done on the Gulf export market unchanged at $70-$71/mt FOB, but argued that the market was due for a correction. “Not much has moved offshore to test pricing, but the expectation for the next quarter is that Gulf Coast pricing will be up by at least $10/mt FOB,” said one trader.
Vancouver: The Vancouver spot market ticked higher to $85-$89/mt FOB in recent trading, up from $85-$88/mt FOB at last report. Short-term contracts were valued in a similar range.
Chinese imports also rose thanks to a reported $107/mt CFR sale to an “end-user,” stretching the range of recent transactions to $101-$107/mt CFR, up from $101-$106/mt CFR at last report.
Some observers questioned China’s staying power, attributing the firming to increased speculation in the market. “I think we are seeing the top of what is sustainable,” argued one contact, who said he suspects there will be “a break in prices by their Chinese New Year celebration” on Jan. 28, 2017. The holiday is often celebrated over a period of weeks, effectively shutting down the market.
Others countered that the firming was reflective of real demand rather than trader speculation, citing the recent end-user sale as a benchmark of buyer sentiment. “Some have been predicting that prices would come off, but now it appears other buyers are entering the market,” commented one source.
Sulfur produced in Alberta netted back (-)$55-$20/mt FOB to suppliers, unchanged from the week before.
West Coast: Formed sulfur offered from West Coast suppliers was steady in the $80-$85/mt FOB range, sources said. Molten contracts were quoted in a $50-$75/lt FOB range for the fourth quarter.
Aramco: Saudi Aramco offered tons at $92/mt FOB Jubail for December loading, a $9/mt increase from the $83/mt FOB offered in November.
ADNOC: The Abu Dhabi National Oil Co. quoted December prills at $88/mt FOB Ruwais, up $6/mt from November’s $82/mt FOB.
Tasweeq: Qatar state-run producer Tasweeq’s price also firmed for December, with offer levels announced at $92/mt FOB Ras Laffan. The producer’s price for November was $10/mt lower at $82/mt FOB.
U.S. Gulf: The NOLA UAN barge price ideas moved up last week, with most players now calling the market within the $150-$155/st ($4.68-$4.84/unit FOB) FOB range. In the meantime, others were quoting still higher at $160-$165/st ($5.00-$5.16/unit) FOB.
Sources attributed the uptick to increased urea prices and also good demand for ammonia in the Cornbelt. One source said if ammonia supplies are depleted, then buyers may come calling for UAN or urea, predicting prices may continue to move up in the New Year.
The East Coast vessel market was reported to be stable-to-slightly higher, with sources calling the most recent price indications within the $172-$178/st mt CFR range. Quotes have been reported at $180-$190/mt CFR.
Eastern Cornbelt: The UAN market was inching up, with several sources reporting that some regional suppliers were no longer offering pricing until the start of the new year due to the heavy fill run. One source said he expected the big ammonia run to boost the UAN and urea markets as well.
The UAN-28 market was reported at $162/st ($5.79/unit) FOB or higher for prepay offers, with UAN-32 prepay pegged in the $185-$195/st ($5.78-$6.09/unit) FOB range, depending on location. Those locations still offering tons for January/February were quoted at the $175-$180/st ($5.46-$5.63/unit) level for UAN-32, and roughly $152-$158/st ($5.43-$5.64/unit) FOB for UAN-28.
Western Cornbelt: The UAN-32 market was “getting stronger,” with sources quoting the Western Cornbelt terminal market at $185-$205/st ($5.78-$6.41/unit) FOB in the region, depending on location and time of delivery. That range was up $10-$15/st from mid-month pricing levels.
California: The UAN-32 market was quoted at $205-$220/st ($6.41-$6.88/unit) FOB out of port terminals in California, depending on supplier and location, with the bulk of new business reported in the $210-$215/st ($6.56-$6.72/unit) FOB range. “Everybody is trying to raise the price,” said one regional contact. No current delivered prices were reported for UAN in the state.
Pacific Northwest: UAN-32 pricing had reportedly firmed to $227-$238/st ($7.09-$7.44/unit) DEL in the Pacific Northwest, up another $12-$13/st from last report. There were reports of limited spring prepay tons being offered at the $225/st ($7.03/unit) FOB terminal level on a spot basis for April and May delivery, but sources also reported that some suppliers had already withdrawn any offers for first and/or second quarter tons at this time.
Western Canada: The low end of the UAN-28 market had firmed to $260/mt ($9.29/unit) DEL in Western Canada for prompt tons, with spring prepay reportedly being offered at $290-$305/mt ($10.36-$10.89/unit) DEL, depending on supplier.
Central Florida: DAP trucks sold on the Central Florida phosphate market were quoted at $315/st FOB, unchanged from the week before. MAP was listed $15/st higher that DAP, at $330/st FOB.
U.S. Gulf: The NOLA DAP market continued to firm last week, riding a spike in mid-season demand to climb above $300/st for the first time since early November.
Sources put DAP trades in the $300-$305/st FOB range, while MAP traded $7-$10/st FOB higher at $307-$315/st FOB. Low inventories at the retail level were seen as feeding barge-market demand, while expectations of milder post-Christmas weather led some to predict an upswing in dry fertilizer applications in the week ahead.
DAP for January and February loading tracked the prompt price higher to $300-$305/st FOB, with most business reported at the upper end of the range.
Several imports were expected in the short term, including a cargo from Chinese producer YUC in late December or early January. A roughly 50,000 mt PhosAgro cargo brought in by ADM is slated for January, and rumors persisted regarding a third cargo of either Russian or Moroccan product, also due in January.
NOLA DAP barges firmed to $300-$305/st FOB, up from $292-$305/st FOB at last report. MAP rose as well, and was generally called in the $307-$315/st FOB range, up from $300-$310/st FOB the week before. TSP was unchanged at $268-$270/st FOB.
Eastern Cornbelt: DAP was unchanged at $335-$345/st FOB most regional warehouses in the Eastern Cornbelt, with MAP pegged at $345-$355/st FOB in the region.
10-34-0 remained at $365-$380/st FOB in the Eastern Cornbelt, depending on location.
Western Cornbelt: DAP was quoted at $335-$340/st FOB in the Western Cornbelt, with MAP pegged in the $345-$350/st FOB range in the region.
10-34-0 was reported at $350-$365/st FOB in the region, with the low in Nebraska and the upper end in Iowa. The top end of the range reflected a $15/st drop from last report.
California: California sources continued to quote the MAP market at $430-$435/st FOB or DEL in the state, with TSP (0-45-0) tagged at $380/st FOB French Camp. The 16-20-0 market was steady at $345-$357/st FOB in California.
The phosphoric acid market was unchanged as well at $8.60-$8.65/unit rail-DEL in California, with Simplot referencing MGA at the $8.80/unit level FOB Lathrop and El Centro.
10-34-0 remained at $413-$418/st FOB in the state, with 11-37-0 quoted in the $448-$453/st FOB range in California.
Pacific Northwest: MAP continued to be quoted at $420-$425/st FOB or DEL in the Pacific Northwest. The TSP (0-45-0) price remained at $365/st FOB Pocatello, Idaho, while 16-20-0 was unchanged as well at $335-$340/st DEL in the region.
The phos acid market remained at $8.10/unit FOB Pocatello and $8.55-$8.60/unit rail-DEL for MGA and SPA in the region.
10-34-0 pricing in the Pacific Northwest was unchanged at $380-$395/st FOB, while 11-37-0 remained in the $406-$421/st FOB range in the region.
Western Canada: MAP was quoted at $570-$590/mt DEL in Western Canada, with reports of limited spring prepay being offered at the $615/mt DEL level on a spot basis. Some sources speculated that spring pricing for MAP could climb to the $625-$630/mt DEL level, but another contact quickly added that spring pricing levels at this point are “anybody’s guess.”
The 10-34-0 market remained at $590/mt FOB and $595-$610/mt DEL for the last spot business in Western Canada, depending on location.
U.S. Export: No new spot sales were reported in the Gulf export market last week. Sources continued to note tight supply for December, while quoting offers at $320/mt FOB for nearest availability.
With no new price points reported, the Gulf export market remained at $320/mt FOB, unmoved from the week before.
Phosphate exports grew in October, according to data from The Fertilizer Institute (TFI). U.S. suppliers shipped 115,788 st of DAP and MAP to offshore buyers for the month, a 9.8 percent year-over-year increase from the 105,444 st logged last October. However, current-month numbers were down from 209,549 st exported in September.
Brazil led all October buyers with 46,509 st received, a 78.1 percent increase from last year’s 26,108 st. Sales into Canada totaled 22,970 st, a 102.8 percent improvement from the year-ago 11,328 st. Colombia was the month’s third-largest buyer at 14,070 st, 7.5 percent higher than the October 2015 tally of 13,091 st.
For the calendar year-to-date through October, Brazil’s 586,897 st more than doubled second-place India’s 258,017 st. Brazil registered 26.6 percent growth from the year-ago 463,435 st, while India lagged its 10-month 2015 total of 324,100 st by 20.4 percent. Canada’s 216,194 st represented 9.8 percent growth over the 196,976 st recorded last year.
Total U.S. exports through October totaled 1,704,408 st, 5.6 percent below the previous year’s 1,805,294 st. The data blamed weaker 2016 demand from India and a number of Central American markets for the decline, as well as a near-collapse in sales to TFI’s 27-nation small-market basket. Calendar-year shipments to those countries combined for just 8,068 st through October, 93.6 percent below last year’s 125,481 st for the same period.
Phosphoric acid sold to India was contracted at $715/mt CFR for first-quarter 2016. Recent spot sales have been rumored at sub-$600/mt CFR levels.
Brazil: The sale of Vale SA’s fertilizer unit to Mosaic will likely position Mosaic as the Brazilian market’s leading phosphate distributor, sources said. The addition of Vale’s current 4.8 million mt/y production capacity to Mosaic’s ledger could mean a shift for the world’s largest fertilizer producer, with more of the company’s phosphate selling into Latin America rather than the North American market for the first time.
Last-done MAP sold into Brazil was called $325-$330/mt CFR, unchanged from the prior week.
Saudi Arabia: Observers put last-done netbacks to Saudi producers in the $300-$310/mt FOB range. However, firmer offers heard from a number of international markets may signal an upward move in the next round of business, sources said.
China: Reduced production and increased domestic demand are playing to the favor of producers. While offers of $330-$335/mt FOB for DAP are commonly heard, sources said nothing has been concluded at that level yet.
Traders said a more realistic DAP price is centered on $315/mt FOB. Industry watchers said people who are using the sale to Pakistan several weeks ago as a guide are now disappointed with their inability to buy under $310/mt FOB.
Australia continues to buy MAP, making Chinese producers happy.
India: By all rights, sources said the price in India for imported DAP should be about $325/mt CFR, based on the Pakistan business from last week. Buyers seem to be more interested in $320/mt CFR, however, while producers are promoting much higher prices. Some buyers point to a sale by Ma’aden into India at $320/mt CFR. Just about everyone else points out that this deal was in early December, however, and prices have since moved up.
The rise in prices in China almost guarantees that Indian buyers will pay more when they finally cut a deal. Among buyers currently hitting the price wall are Deepak and IPL. Deepak has reportedly pulled back from its earlier searches this week after sellers refused to budge from their initial offering price.
Independent surveys of DAP prices across the country show varying prices among producers, but a clear upward trend across the board.
The Mosaic Co. announced Dec. 19 that it has agreed to acquire from Brazil’s Vale SA the bulk of its Vale Fertilizantes business for $2.5 billion. Vale will have the potential to earn an additional $260 million, to be paid in cash over the two-year period following closing if certain financial metrics are met. Upon closing, anticipated for late 2017, Mosaic expects to become the leading fertilizer production and distribution company in Brazil, one of the world’s major agricultural markets. Reports of a possible deal have been circulating for months (GM June 17, p. 16).
“This acquisition provides Mosaic a tremendous opportunity to capitalize on the fast-growing Brazilian agricultural market and from improving business conditions,” said President and CEO Joc O’Rourke. “We see this as an ideal strategic fit for Mosaic. We have proven expertise in phosphate mining and manufacturing, a strong record of successful acquisition integration, and extensive relationships and experience in Brazil.
“Shipments in 2016 are estimated to be over 33 million mt, likely surpassing the 2014 record,” O’Rourke told analysts. He noted that Brazil is the second largest country in potash shipments behind China, and is ranked third in phosphates behind China and India. He said fertilizer consumption has grown at a 5 percent compounded rate this decade, outpacing growth in every major agricultural region.
“Mosaic has agreed to acquire high-quality and complementary assets in a powerhouse agricultural center that have significant cost advantages at an attractive valuation,” said Rich Mack, executive vice president and CFO. “We expect this transaction to be both accretive to earnings and cash flow positive, and we will continue our focus on maintaining a solid investment grade credit rating.
“As commodity and crop nutrition markets improve, Mosaic will have the ability to meaningfully outperform our competition and generate shareholder value,” he added. “Vale will be a valued minority shareholder and partner who will bring significant Brazilian expertise that we believe will benefit Mosaic in the years ahead.”
Vale, which has been shedding assets in order to pay down debt, said the deal achieves that goal, but also adds substantial value as it enhances Vale’s exposure to the worldwide fertilizers market, particularly in the large and fast-growing agricultural regions of North America and Brazil.
“The multiple appears high, implies 12-16x 2016e EBITDA without synergies, but gives Mosaic a large position in Brazil, one of the largest global agricultural markets,” said Neil Fleishman, Green Markets Director of Research. “The highlight of the acquisition is ~5 million mt of finished phosphate capacity (MAP/TSP/SSP). The potash mine is high-cost and close to depletion, and Mosaic is unlikely to develop any acquired potash projects in the near-to-medium term. Green Markets estimates the deal also includes ~5.6 million mt of phosphate rock (five mines),” he added.
Mosaic said the $2.5 billion base purchase price valuation implies 6.6x through cycle adjusted EBITDA (five-year average).
The business to be acquired currently has capacity to produce 4.8 million mt of finished phosphate crop nutrients and 500,000 mt of potash. It includes five Brazilian phosphate rock mines and four chemical and fertilizer production facilities, as well as one potash facility in Brazil. Through the acquisition, Mosaic also will acquire Vale’s 40 percent economic interest in the Miski Mayo phosphate mine in Peru, taking Mosaic’s own stake in that asset to 75 percent.
The deal also includes 20 percent ownership in one of Brazil’s busiest ports, TIPLAM, as well as dedicated rail and warehousing capabilities. TIPLAM is also an ammonia import port, which the company can use to access product for its plants.
The purchase also includes Vale’s junior potash mining project at Kronau, Sask., Canada, as well as an option to include the partially-constructed Rio Colorado, Argentina, potash project at closing as part of the transaction. The inclusion of Rio Colorado is subject to Mosaic’s agreement following appropriate diligence. The Rio Colorado project was idled in 2013 (GM Jan. 28, 2013), however, the company has been in talks with Argentinean and provincial authorities this year about getting the project back on track.
The transaction excludes Vale’s Cubatão-based nitrogen and non-integrated phosphate business, which is required to be carved out of Vale Fertilizantes prior to closing. These are mostly dedicated to nitrogen nutrients, and accounted for an adjusted EBITDA of US$108 million in 2015. Mosaic said it will have supply agreements to access nitrogen from the Cubatão business.
Vale said it expects to explore the sale of these Cubatão assets in 2017. To date, Yara International ASA has been mentioned as a possible buyer for these assets.
Mosaic’s combined fertilizer business in Brazil will be led by Rick McLellan, currently Mosaic’s senior vice president, commercial. He led the fertilizer business in Brazil when Mosaic was formed in 2004. The acquisition will add approximately 8,000 employees, bringing Mosaic’s global headcount to approximately 17,000.
Mosaic intends to fund the acquisition with $1.25 billion in cash, which the company plans to raise through the issuance of debt, and approximately 42.3 million shares of its common stock. The shares of Mosaic common stock to be issued to Vale at closing are expected to represent approximately 11 percent of Mosaic’s outstanding shares. After closing, Vale will have the right to designate up to two individuals, one of whom must be independent, for nomination to Mosaic’s board of directors as long as it continues to meet certain ownership thresholds.
Subject to limited exceptions, the Mosaic shares to be issued to Vale may not be transferred for two years following the closing, after which time Vale will have customary registration rights. In connection with its minority interest, Vale has agreed to certain stand-still and lockup obligations, and to certain voting agreements.
The deal is expected to be accretive to Mosaic’s earnings per share in 2018, generate over $80 million of after-tax synergies, and provide substantial leverage to improvements in the crop nutrient business cycle.
Mosaic expects that its U.S. phosphate production facilities will continue to operate at high rates in order to meet strong and growing global demand. The company’s premium MicroEssentials® products are also expected to continue to be produced exclusively in the U.S., and Brazil is expected to remain a key market for MicroEssentials; its growth this year to Brazil is put at 60-70 percent. Demand will continue to be met by Mosaic’s 3 million mt/y capacity in Florida, though the company said long-term MicroEssentials capacity could be added in Brazil.
Mosaic is already one of the largest producers and distributors of blended fertilizer for agricultural use in Brazil, owning and operating 12 blending plants in Brazil and one in Paraguay. In addition, it leases several other warehouses and blending units, depending on sales and production levels. It has a 62 percent ownership interest in Fospar SA, which owns and operates a SSP granulation plant and a deep-water fertilizer port and throughput warehouse terminal facility in Paranagua, Brazil. The port facility at Paranagua handles approximately 2.6 million mt of imported fertilizer.
Mosaic says it has completed the integration of its 2014 acquisition of ADM’s fertilizer distribution business in Brazil and Paraguay (GM April 21, 2014). With current assets, the company says it is poised to increase its distribution capacity in the region from approximately 4 million mt to 6 million mt. Also inked with ADM in 2014 were five-year fertilizer supply agreements to meet ADM’s fertilizer needs in Brazil and Paraguay.
Ironically, in 2010 Vale was consolidating its position within the Brazilian fertilizer business and paid Mosaic $1.03 billion for the company’s 20.27 percent stake in Vale Fertilizantes (GM Oct. 4, 2010). Vale also bought up the shares of Yara and Bunge Ltd., as well as several Brazilian companies.
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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.
