Phosphate Holdings Inc. (PHI) the sole shareholder in Mississippi Phosphates, reported a 207 percent increase in net income for the third quarter ending Sept. 30, 2008, to $12.6 million ($1.56 per diluted share) compared to the year-ago $4.1 million ($.50 per share). Net sales were up 310 percent during the quarter, to $171.6 million versus the year-ago $41.9 million.
“The third quarter of 2008 represented another solid quarter for the company,” said Robert Jones, PHI CEO. “We maintained near-record sales prices per ton of DAP sold, but did see our margins decline significantly as a result of higher raw material input costs.”
Despite the upbeat results for the third quarter, PHI said the fourth quarter is off to a difficult start due to declining sales volumes in an increasingly illiquid phosphate market. PHI said phosphate demand began to decline late in the third quarter and that it has continued to the point that there is now very limited demand. As a result, prices have fallen and the company is now evaluating production curtailments in the fourth quarter. PHI would use this time to do maintenance.
Jones expects a lack of demand will cause curtailments in all exporting countries, with reports that Russia has cut production by 50 percent. Jones said one sulfuric acid plant was down in October for nine days and that the DAP plant was down several days in early November for a repair. Jones noted that because of the current situation the company did not work 24/7 to get the plant back up.
Jones downplayed the idea of a flat-out cold curtailment, the total shutdown of the plant. He said such would cost about $1 million per month.
Current DAP inventories are put at 40,000 st, with storage capacity at 55,000 st. The company said it has 200,000 st of phosphate rock in stock, which is higher than in the past. It traditionally carries low levels of ammonia and sulfur in inventory, and says it has not begun negotiations for first quarter 2009 phos rock purchases. Rock is at historically high levels. Jones expects to negotiate a new rock contract by the end of the year. He said current rock prices will not support DAP production at current levels – the price of rock will have to come down, DAP go up, or there will have to be curtailments. He estimated that 30 percent of the world production is based on purchased rock. Jones also noted that the company may have to take a write-down on the value of its inventories in the fourth quarter.
Jones said prompt demand is virtually non-existent and that sales are “very, very weak.”
“Buyers are essentially on strike,” Jones told analysts. Citing low corn prices, Jones said $4.00 corn going forward is still a good price. He added that there is a very full supply chain in the U.S. and Latin America, which has retarded movement to warehouses.
“Buyers are unwilling to catch the falling knife.” He said they fear prices will fall further.
Jones said warehouses in the U.S. are full and that once the late harvest is completed, inventories can quickly be depleted. He hopes this will happen during the rest of the year.
“While the worsening financial crisis has had a sudden and dramatic effect on phosphate demand, we firmly believe that phosphate fertilizer demand will resurface in the near term because an adequate supply of phosphates is so essential to world agriculture,” said Jones. “Phosphate fertilizers play a critical role in producing food for a growing world population. If the financial and credit issues constraining international phosphate trade are not resolved, an already tight food supply chain could be unduly stressed.”
“We are not making Gucci purses at Pascagoula,” Jones told analysts. “We are manufacturing food. And that food is essential to feed a growing world population.” “We firmly believe DAP demand will return,” Jones continued, adding that the “return to normalcy” should be “sooner, rather than later.” He said the basic drivers – population growth and improving diets worldwide – have not suddenly changed in the past three weeks. “This does not feel like a cyclical downturn,” added Jones. “I have been through a lot of those in 35 years and this is not one of those.”
He said global DAP demand is impacted by the global financial crisis. “Banks will not loan to buyers or confirm letters of credit,” he said, particularly to emerging countries.
“This has caused a clamp down on international trade.” “The sole respite has been sharply lower raw material costs,” said Jones. He cited the recent drop in Tampa ammonia from $931/mt to $350/mt and Tampa sulfur from over $600/lt to $150/lt. PHI called sulfuric acid prices at $100-$150/st down from $250/st one month ago.
The average sales price for DAP for the third quarter was $1,045/st, a 167 percent increase over the prior-year price of $392/st. DAP tons sold during the quarter were put at 162,926 st. Operating income was $20 million during the quarter, up from the year-ago $6.6 million. EBITDA was $22.5 million, up from $8.7 million.
Nine-month net income was $54.6 million ($6.75 per share) on sales of $410.0 million, up from the year-ago $37.7 million ($4.67 per share) and $151.8 million. Nine-month operating income was $85.9 million versus the year-ago $22.9 million. EBITDA was $94.3 million, up from $66.2 million. Net income and EBITDA for the year-ago nine-month period included hurricane-related insurance recoveries of $37.8 million.
While PHI continues to progress with its IPO before the Securities Exchange Commission, Jones said the drop in public fertilizer stock values by over 70 percent since June/July may cause the company to defer this option. He said if conditions are as they are now when the SEC process is complete, the company will not launch the IPO.
Proceeds from the IPO were to fund a new sulfuric acid plant. The company has submitted a permit request for the new plant and has ordered a new absorption tower. However, this can either go to a new plant or replace one of the existing four towers.
Spectrum Brands Inc. reports that it plans to shut down operations at all of its growing media businesses by Jan. 31, 2009. This includes subsidiary United Industries Corp.’s Sylacauga, Ala., fertilizer plant, which has approximately 77 full-time employees. Some 30 additional administrative jobs in Birmingham are also expected to be eliminated.
Spectrum/United has traditionally supplied the lawn and garden market via its Home & Garden segment. Spectrum bought the Sylacauga business and much of its fertilizer assets from Pursell Industries back in 2002 (GM Jan. 7, 2002, p. 10; Oct. 7, 2002, p. 10).
Spectrum said it is eliminating unprofitable businesses, including fertilizer, enriched soils, mulch, and grass seed. The company has been trying to sell these businesses and has not been successful.
“We believe that the inability of interested buyers to obtain the necessary working capital financing proved to be an insurmountable issue,” Kent Hussey, Spectrum CEO, told analysts. “Our growing products segment required a working capital investment in the peak of the production cycle of nearly $100 million. While these products delivered revenues of $267 million for fiscal 2008, gross margins for the growing products business were down 16 percent year-over-year, creating a significant drag on the rest of our businesses. Adjusted EBITDA for our growing products in 2008 was a loss of $11.3 million; including allocated overheads of approximately $9 million, the loss was over $20 million.”
Hussey told analysts that the growing products delivered an adjusted EBITDA loss of $11.9 million for the fourth quarter, while the controls unit delivered positive adjusted EBITDA of $17.1 million. Consolidated EBITDA for the company was $84.8 million versus the year-ago $93.3 million. FY’08 company EBITDA was $281.3 million, a 1.3 percent increase over the prior year.
Hussey also cited a sluggish housing market, tight inventories at retailers, low levels of foot traffic, and unprecedented commodity impacting the growing products category. Despite recent declines in urea, Hussey said DAP and potash prices remain at historically high levels.
As a result of the growing products shutdown, Spectrum expects an annualized net savings of $15-$20 million. It is also expected to eliminate some $90-$100 million of investment in working capital during the growing products’ peak season. Spectrum expects to record charges of $60-$75 million during fiscal 2009 related to its decision to exit this portion of the business.
According to its SEC filings, Spectrum both owned and leased H&G lawn and garden blending, packing, and distribution locations in Orrville, Ohio. It owned locations in Cave City, Ky., and Livingston, Texas, and leased sites in Winterhaven, Fla., Los Angeles, Calif., Sylacauga, Ala., and Brantford, Ont.
Spectrum has had exclusive brand arrangements for its Vigoro brand at The Home Depot, for its Sta-Green brand at Lowe’s, and for its Expert Gardener brand at Wal-Mart. As such, these products have been positioned as the “value” option to other name-brand products. Hussey told analysts that the company is currently working on transferring its fertilizer brand names to its retail customers. As for whether there will be any compensation for that he said, “We’re still working on that.”
Primary competitors for the H&G business have been The Scotts Miracle-Gro Co. and Central Garden & Pet Co. Last week, primary competitor Scotts (GM Nov. 17, p. 11) said it is in negotiations with retailers to take over the private label branding that was exited by Spectrum.
Spectrum sold its Canadian lawn and garden business about a year ago (GM Oct. 8, 2007, p. 12) for $15 million. This included lawn and garden blending, packing, and distribution locations in Woodstock, Ont., Crossfield, Alberta, Abbotsford, B.C., and Laval, Quebec.
Spectrum is not totally deserting the home and garden sector. It plans to retain its control business, which includes indoor and outdoor insecticides, pesticides, herbicides, and personal repellants. It said these products generated over $300 million in revenues during fiscal 2008 and have high gross margins, less seasonality, and lower peak working capital investment. Control brands include Spectracide, Hot Shot, Cutter, and Repel. Spectrum controls locations include leased manufacturing at Vinita Park and Bridgeton, Mo., and distribution at Orrville, Ohio, San Bernardino, Calif., Vinita Park, Mo., Pendergrass, Ga., and Edwardsville, Ill.
Spectrum reports that Amy Yoder, United Industries president, voluntarily resigned in October to pursue other opportunities. She signed a separation agreement entitling her to an approximate $1 million in salary and other pay, as well as additional bonuses for which she may have been eligible in FY’08, according to SEC filings. David Lumley, Global Batteries president and co-chief operating officer of Spectrum, has assumed day-to-day operations of the H&G operations, including the control business, which will remain as an ongoing business.
Lumley and Hussey, along with Anthony Genito, CFO and chief accounting officer, and John Heil, co-chief operating officer, have all signed long-term incentive agreements in addition to existing long-term incentives. The aggregate payable to each is as follows: Hussey, $721,875; Genito, $187,000; Lumley, $393,750; and Heil, $337,500. The total amounts are payable in two equal installments, one on Dec. 31, 2008, and another Dec. 31, 2009. Lumley and Neil also each received a boost in salary as of Nov. 1.
Hussey also received a retention agreement in which he can receive $1.2 million if he remains with the company through the end of 2009.
Write-offs put Spectrum well into the red during the fourth quarter and for fiscal year 2008. Spectrum reported $550.4 million in goodwill and trade name impairments during the fourth quarter, versus year-ago impairments of $148.4 million. Only about $60 million of the fourth quarter 2008 impairments came from the home and garden segment, with the rest coming from other areas of the company.
Total fiscal 2008 impairments were $721.9 million, versus the prior year impairment of $323.8 million. Some $150.9 million of FY’08 impairments were attributable to the home and garden business.
Spectrum just reported a net loss of $492.6 million ($9.68 per diluted share) on sales of $706.5 million for the fourth quarter ending Sept. 30, 2008, versus a year-ago loss of $333 million ($6.60 per share) and $659.2 million, respectively. The H&G business reported fourth-quarter profit of $1.8 million on sales of $123.7 million, compared to the year-ago $6.2 million and $111 million. Of this, $36.4 million in profits came from the control portion of H&G on sales of $84 million, versus the year-ago $32.9 million and $78.2 million, respectively. Spectrum actually reported sales growth in all three of its major business segments for the quarter, including H&G, Global Batteries & Personal Care, and Global Pet Supplies. While H&G profits were off, they were up for Global Batteries and down slightly for Global Pet. Hussey said he believes the company will have free cash flow next year.
For the year ending Sept. 30, Spectrum’s loss was $931.6 million ($18.29 per share) on sales of $2.69 billion versus the prior year loss of $596.8 million ($11.72 per share) and $2.56 billion. The H&G segment reported profit of $8 million for the year on sales of $595.7 million versus the year-ago $47 million and $570.2 million, respectively. FY’08 control sales were $328.7 million.
In other news, Spectrum is in danger of losing its listing – SPC – on the New York Stock Exchange. It received notice Nov. 4 that it was “below criteria” for the NYSE’s continued listing standards because its average total market capitalization was less than $75 million over a 30-day trading period and, at the same time, its stockholders’ equity was less than $75 million. As of Oct. 31, 2008, the latter was $72.4 million. The company has 45 days from the date of the notice to submit a plan to come into compliance within 18 months.
“While we are extremely disappointed in the recent performance of our stock, which was pressured during the last few months by an extremely volatile market as well as by the distribution of over 12 million shares held by our largest shareholder, Thomas H. Lee Partners, a private equity firm, in conjunction with the winding down of one of its investment funds, we do not believe that this notification reflects the performance of our businesses,” said Hussey. T. Lee Partners was formerly Spectrum’s largest shareholder, representing almost 25 percent of shares outstanding. Hussey pointed to the positive performance of the Global Batteries and Global Pets segments, adding that the company has $105 million in cash and $108 million of availability on its $225 million ABL and is in compliance with the requirement under senior and subordinated debt agreements. Hussey did say that companies like Spectrum, which have high levels of debt, have been more severely impacted during the current financial crisis as investors have made a flight to security.
Spectrum is also in danger of NYSE delisting because its stock price recently dropped below $1.00. If it remains below $1.00 for a consecutive 30-day period, the stock could be delisted.
The Chinese government released their newest tariff rates Nov. 14. The new rates retain the two-tier pricing for many products to discourage exports during periods of high domestic demand. A premium surcharge of 75 percent will be added to a high season duty of 35 percent for a total of 110 percent on urea, TSP, NPK, MAP, and DAP exports.
The low season duty varies by product. Urea, MAP, DAP, and TSP will have a 10 percent duty, while NPK will have a 95 percent export duty imposed.
The full list of products and duties follows.
Name of Product
High season
Low season
High season total
Low season Total
Urea
35
10
110
10
AMSUL
0
0
0
0
AC
0
0
75
75
Other nitrogen
0
0
75
75
TSP
35
10
110
10
SSP
30
30
105
105
MOP
30
30
105
105
SOP
30
30
105
105
NPK(NP)
35
20
110
95
DAP
35
10
110
10
MAP
35
10
110
10
Others
0
0
75
75
High season for urea is February through June and Sept. 1 through Nov. 15. High season for TSP is February through May. DAP/MAP high season runs February though May and August through October.
The tax authorities have also set base rates that could kick in additional duties. The urea export tax base is US$337/mt FOB. If the selling price is higher, a tax rate equal to 1.1-base/sales price times 100 is applied. A similar formula is used for TSP with a base rate of US$454/mt FOB, DAP at US$582/mt FOB, and MAP at US$542/mt FOB.
Asian sources had noted that Chinese urea and DAP producers have been facing a great deal of pressure in the past two months. Lower domestic prices combined with earlier purchases of expensive inputs to put a squeeze on the producers’ bottom line. Earlier reports out of China had the government planning to eliminate the DAP duty to encourage offshore sales.
La Coop federee, Land O’Lakes, Inc. (LOL), and CHS Inc. (CHS) have announced the signing of a share purchase agreement under which La Coop federee will acquire the shares of Agronomy Co. of Canada Ltd. (ACC), a LOL/CHS 50-50 joint venture. Terms of the acquisition, expected to close Dec. 31, 2008, were not disclosed.
In the transaction, La Coop federee will acquire the shares of ACC, including the ACC corporate office and grain assets based in Belton, Ont.; Wellburn Agromart Ltd., a crop inputs and grain subsidiary of ACC located in Wellburn, Ont.; an ownership position in 20 Agromart retail businesses across four Eastern Canadian Provinces, operated as joint ventures between ACC and independent business partners, with ACC continuing as a joint venture partner (owned by La Coop federee); and indirect ownership interests in affiliated companies serving the Agromart businesses, including Agromart Terminals, Inc. and Agromart Processing Co. Inc.
Claude Lafleur, La Coop federee CEO, said the acquisition supports the Canadian cooperative’s focus on being the first cooperative marketer and supplier in Eastern Canada for Canadian agricultural producers. “For some years now, La Coop federee has been pursuing its expansion throughout Canada thanks to acquisitions comparable to the one being announced today. We are convinced that our expertise, when combined with that of our new partners involved in this transaction, will benefit all our clients,” Lafleur said.
LOL and CHS also positioned the transaction as a positive strategic initiative. “This transaction enables us to further intensify our focus on wholesale crop nutrients and crop protection products,” LOL President and CEO Chris Policinski and CHS President and CEO John Johnson said in a joint statement. “Further, we were pleased to be able to position Agronomy Co. of Canada with a buyer that offers considerable experience and expertise within the inputs, seed and crop protection industry. We believe this transaction is a positive strategic move for Land O’Lakes and CHS, La Coop federee and ACC.”
La Coop federee is a federation of agricultural cooperatives in the province of Quebec, Canada. Originally founded in 1922, it now comprises 95 cooperatives belonging to 76,000 members. As a wholesaler, La Coop federee supplies farmers in Quebec, Ontario, and New Brunswick. Through its subsidiary, Olymel LP, it is involved in pork and poultry processing and marketing. La Coop federee and its network of affiliated cooperatives employ nearly 17,000 people, with cumulative sales approaching $5 billion dollars.
Officials with Allied Terminals are still struggling to deal with the aftermath of the disastrous collapse of a storage tank at their Chesapeake, Va., site (GM Nov. 17, p. 12). The spill released 2 million gallons of fertilizer that flooded a nearby community, raised concerns over river pollution, and brought to the scene a full compliment of federal and state inspectors.
The reason why the structure came apart while it was being worked on Nov. 12 is still being investigated. Residents returned to their homes after leaving when the liquid ammonium nitrate flowed down their streets and into their yards. No one was available at Allied’s corporate office in Norfolk to explain how the loss will affect the companies that own the fertilizer.
At the same time, Kinder Morgan reported virtually no impact on operations at its terminal in Wilmington, N.C., where another tank with 2.5 million gallons of liquid fertilizer started leaking Nov. 7. KM officials there said the quick response minimized environmental damage and reduced product loss to a minimum.
Recovery efforts at Chesapeake were joined by three private cleanup companies plus a small army of federal and state inspectors. Local fire department spokesman Steve Johnson counted nearly a half dozen agencies on the scene, including EPA, Virginia Dept. of Environmental Quality, U.S. Coast Guard, and U.S. and state public health services. “It’s almost easier to figure out who wasn’t there,” Johnson remarked. He told the local press that with a million gallons contained inside a berm and 800,000 gallons scooped up by vacuum trucks, about 200,000 gallons of liquid fertilizer remains unaccounted for.
Johnson said a top priority for cleanup crews was flushing out streets, ditches, and drains in South Hill across from the terminal, where the liquid fertilizer flowed after the tank collapse. Approximately 30 people left their homes voluntarily, he reported, and the company paid for 20 of them to spend three nights a local hotel. Allied opened a dialogue with residents at a face-to-face meeting, where the main concerns were whether it could happen again and if there could be side effects from the spill, despite assurances from health authorities that UAN fertilizer was harmless except when ingested.
But state and federal environmental inspectors said while the fertilizer poses no serious risks to humans, it could cause problems in the Elizabeth River, where an undetermined quantity of the fertilizer flowed after the release. “The fertilizer contains ammonia and nitrogen, both of which have the potential to pollute the water,” said Bill Hayden with the Virginia DEQ. “The nitrogen should not be a problem this time of year, but the ammonia can be toxic to fish and other creatures in the water. So now we have to wait and see how much of the fertilizer got into the river.”
The release at Kinder Morgan’s Wilmington terminal came from a crack in the tank’s floor, but the cause still hasn’t been pinned down. Terminal Manager Bruce Kirk told Green Markets the floor is undergoing an internal X-ray scan, which should disclose any thin spots left by corrosion. “We’ll probably be going in and replacing at least the outer parts or possibly the whole floor,” Kirk commented.
Kirk said that fortunately the leak was discovered at almost the instant it happened by an employee making the rounds of the terminal. Despite occurring at quitting time on a Friday afternoon, he said KM was able to quickly marshal the equipment, including four vacuum trucks, a front-end loader and backhoe, and personnel needed to handle the situation. Being able to transfer product to other tanks plus a barge with about 400,000 gallon holding capacity saved the day, Kirk reported.
Final figures aren’t available yet, but Kirk estimates that less than 300 tons are unaccounted for. He said that amount can be replaced, meaning that the six owners won’t suffer any loss. Owner interests typically are co-mingled, and Kirk said he was unable to divulge any names of customers.
Indications are that the environmental impact has been minimized. Kinder Morgan reported that after getting aerators on the water to dilute the product, creek levels have tested within safe limits and no fish kill has been seen. Since much of the lost product is believed to have soaked into the ground in the berm area, a secondary dike was built to stockpile soils, which will be donated to farmers – with permission from USDA and the state DEQ. In fact, Kirk revealed he’s already had several calls from parties eager to get the fertilizer-rich material.
Sacramento, Calif.-The California Department of Food and Agriculture (CDFA) has announced plans to fill two vacancies on its fertilizer inspection board’s technical advisory subcommittee, which advises the board on fertilizer research and education programs. According to CDFA, this program funds research to advance the environmentally safe and sound use of fertilizer materials, as well as proper handling. Individuals interested in a subcommittee appointment should contact Dr. Amrith Gunasekara at agunasekara@cdfa.ca.gov or 916-445-0444. Additional information is available from CDFA’s inspection and compliance branch at 916-445-2180.
CF Industries Holdings Inc. said Nov. 21 that its board of directors has elected Bert Frost to be vice president, sales and market development. Frost joins the company immediately and will succeed Monty Summa, currently vice president, sales, effective Jan. 1, 2009. In October, the company announced Summa’s plans to retire at year-end.
Frost, 44, comes to CF from Archer Daniels Midland Co.. He had served as managing director, international fertilizer and inputs, based in Rolle, Switzerland, since early in 2008. Frost was responsible for expanding crop input sales in Europe, as well as growing the company’s South American fertilizer/input ventures. Prior to that, he was director of the fertilizer, logistics, and ports divisions for ADM based in Sao Paulo, Brazil.
“I believe that Bert Frost, with his extensive international experience in the fertilizer and crop inputs industry, will play an important role in CF Industries’ evolution from a North American player to a global producer and distributor of fertilizer products,” commented Stephen Wilson, CF chairman and CEO.
Earlier in his career, Frost held several positions with Koch Industries, including country director in Argentina, responsible for business development for Koch’s international and agriculture division.
Frost holds a B.S. in Business from Kansas State University.
U.S. Gulf/Tampa: The last done Tampa business continues to be called $350/mt DEL. All eyes are on NOLA, where prices are expected to fall off to be in line with Tampa numbers.
Sources report that Mosaic’s decision to take its Faustina, La., ammonia plant offline may have as much to do with containment/storage issues as anything. Sources say product is not moving and is building up in storage with nowhere to go. Gas prices continue to sink, keeping the actual economics of making ammonia in play. Sources speculated it made more sense for Mosaic to simply bring in ammonia rather than bothering with Faustina inventory concerns.
U.S. imports in September were off 7 percent, to 658,955 st from the year-ago 705,665 st. July-September imports were off 2 percent, to 2.04 million st from the year-ago 2.08 million st.
Eastern Cornbelt:The onward push of harvest and some generally open weather conditions in Illinois allowed applications of ammonia last week. Sources reported good demand out of some terminals, though movement was limited to fall prepay tons.
The lack of spot business left most sources puzzling about the cash market for ammonia. “I’m at a loss to call that market,” said one source, who speculated that spot tons could be had at the $650/st FOB mark in Illinois last week. There were reports of spring prepay booked out of spot Illinois river locations at the $665/st FOB level, however. Those numbers reflected another sizable drop from last report.
On a forward contract basis, however, postings remained considerably higher. One supplier was referencing forward contract ammonia tons last week at $1,015-$1,025/st FOB regional terminals to the dealer for the December/January shipping period.
Western Cornbelt:Dealers reported some movement of fall prepay ammonia to the field in mid-November as temperatures dropped and harvest activities were winding down. Several said they were counting on a favorable weather forecast for the near term to make up for the late start. Sources also reported some movement of dries to the field last week, but no spot market sales as dealers tapped heavy prepay inventories.
With no business to test the market, sources were at a loss to quote any spot market values for ammonia last week. One said pricing out of production points in Oklahoma and Kansas had dropped to $400-$425/st FOB, which would put delivered tons into the Missouri market at roughly the $500/st mark. Another source speculated that spot market tons could be had in the $500-$600/st FOB range on the western leg of the pipeline. Reference prices remained considerably higher, however, with one supplier referencing forward contract ammonia for December through May at $1,010/st FOB in Nebraska and $1,020/st FOB in Iowa.
Northern Plains: Sources had little to report last week due to inactivity and minimal demand. Dakota sources described the fall ammonia season as basically over, and one said it never really happened at all, with volumes ranging from 10-40 percent of normal. The cutbacks were attributed to the late harvest and to buyer resistance at the retail level.
Even as one regional supplier was referencing forward contract ammonia as high as $1,020-$1,040/st FOB regional terminals for December-May shipments, sources said spot market ammonia could possibly be had in the $600s/st FOB Minnesota terminals last week, although there were no sales to confirm that level. One source said the last quote he’d officially heard was in the $900/st FOB range, but that was some time ago.
Dakota Gasification’s Beulah, N.D., ammonia plant was up and running, but the company was offering no spot or forward pricing last week, and sources said there is a lot of fall prepay that never got pulled. As a result, no reliable information was available for ammonia pricing in the region, either on an FOB or DEL basis.
Eastern Canada: With no fall movement and no spring prepay program announced, sources reported no current pricing for anhydrous ammonia in the region. One quoted a $1,330/mt FOB price for the last prompt business, but that was an old number and does not reflect current market conditions.
Middle East: Once again, a deal involving IFFCO, its partner KIT, and a Middle East producer shows a price well below $200/mt FOB. Asian sources are now certain that the market in the Mideast has dropped to a level not seen for five years.
Reportedly, Kisan sold a cargo to IFFCO from Qafco at $190/mt CFR. The netback on that deal is estimated back to $160/mt FOB.
Just a couple of weeks ago another deal involving KIT, Transammonia, and IFFCO was pegged at $240/mt FOB, for a netback estimated at $180-$200/mt FOB.
At first a number of observers in the industry were ready to dismiss the earlier deal. At that time the conventional wisdom was that the market was holding at $300/mt FOB. Asian traders looked at the deal as a one-off event designed to ease pressure on supplies in the Middle East. Once this cargo was gone, they said, producers might be in a better position to hold onto their higher price ideas.
The latest deal indicates to more than one source that producers are still strapped for buyers.
The problem is that there are fewer and fewer buyers in the market.
The German company BASF announced a global plant closing program. Companies in Taiwan and South Korea – two major markets for the Middle East ammonia producers – have been reducing output or closing down for several weeks now.
All in all, the demand for ammonia in the industrial sector is getting weaker as the global economic situation worsens.
Based on the latest IFFCO business, people are now calling the Middle East market at $160-$190/mt FOB.
Black Sea: No new fixtures were reported in the area last week.
Sources say producers are contemplating more closures for an extended time – or at least until the market rebounds.
Based on the math from the latest Mideast business, sources in Asia say the price in Yuzhnyy has to drop to about $120/mt FOB to remain competitive. It would have to drop even further if sellers wanted to sell to Asia.
Despite the talk of near $100/mt FOB ammonia, no one is putting the market in that area. Without new business to set a level, sources say the ammonia market is hovering in the mid-$200s/mt FOB. Some argue for prices as high as $270/mt FOB, but others say the top is closer to $250/mt FOB.
Asia: The announcement by BASF that it was closing a number of its plants, including those in Asia, was the latest in a round of closures by ammonia buyers.
Taiwan and South Korean companies complained bitterly as the ammonia price went up throughout the year. They were able, however, to pass on much of the increased costs to their consumers. They tried to push back against the price increases and occasionally were able to shave a dollar or two off their ammonia. But by and large, they had to pay the high prices just like everyone else. With the collapse of global credit markets, however, these same buyers are now canceling their ammonia orders and temporarily shuttering their plants.
The suspension of major buying contracts has had its impact on the supply and demand equation. More producers are reporting increasing reserves in their home tanks.
Even with the extended closures of KPA and KPI by Mitsui and Mitsubishi and the slow progress to renewed production at the Australian Burrup facility, sources say there is still too much ammonia in the marketplace for any kind of reversal in the price slide.
UREA
U.S. Gulf: While several in the market were calling urea about as dead as phosphates, others saw some life. One contingent of players reported actual prompt granular movement within the $245-$255/st FOB range, down a good bit from the prior week’s $270-$300/st FOB. No one was willing to bet that the bottom has been found.
Fear that Chinese urea would soon flood the U.S. has abated. Sources said that the U.S. is now the cheapest place in the world for urea and it is not likely to attract any stray imports, even from China. And if urea was to come from China, it would more likely go to the West Coast than to NOLA.
U.S. imports in September were off 28 percent, to 521,251 st from the year-ago 722,546 st. July-September imports were off 5 percent, to 1.28 million st from the year-ago 1.36 million st.
Eastern Cornbelt: Granular urea was pegged at $340-$390/st FOB regional terminals, reflecting another drop from last report.
Western Cornbelt: Granular urea was reported in the $335-$380/st FOB range in the region, with no new sales reported to test the market. Sources said postings out of Enid, Okla., had dropped to $295/st FOB last week for cash tons, and another supplier was offering forward urea tons for December at $290/st FOB Inola, Okla.
Northern Plains: Granular urea was pegged at $340-$390/st FOB, with the low reported out of Minnesota terminals on a spot basis. One supplier was referencing forward contract urea for December at the $365/st DEL level in North Dakota and northern Minnesota.
Northeast: Granular urea was tagged at $390-$400/st FOB Philadelphia, Pa., and Baltimore, Md., to the dealer. Sources also quoted the E. Liverpool, Ohio, urea market at the $390/st FOB level at mid-month.
Eastern Canada: Regional dealers were facing falling replacement costs with plenty of high-priced inventory already under the roof. The lack of interest was prompting some to sit tight on prices while others reported weakening spot markets. “We’re sitting status quo because it’s an exercise in futility to chase what’s current,” said one supplier. Added another source, few suppliers are offering spot pricing because they are “waiting to find the market themselves. No one will quote with any confidence or level of comfort.”
The result was some wide-ranging pricing ideas for spot tons. Granular urea, for example, was quoted at $660-$861/mt FOB in the region last week, reflecting a sizable drop from last report. New sales to test those numbers, however, were few and far between.
All told, about 550,000 mt was offered, with another 215,000 mt offered as seller’s option cargoes.
Negotiations opened up shortly after the tender closed Nov. 20. Sources speculate MMTC will ask the Mideast producers to shave a few dollars off their offers. Chances are the price will come down $2-$3, leaving MMTC with a delivered price of around $270/mt. And considering that $370/mt CFR was considered a bargain just a few months ago, few in the industry think MMTC will have anything to complain about in this tender.
Once the Middle East tons are negotiated down, sources say
the likely next step is to get the other offers down to the $270/mt
CFR level. Some of the offering companies might be in a good
position to take a few dollars off to get the award.
Freight is working in the favor of the buyer as well.
The rate from the Arab Gulf to the west coast of India is now pegged at $7.50/mt. To the west coast the freight rate is $10/mt FOB. Just a couple of weeks ago, the rate to the west coast was $10/mt FOB.
The drop in shipping costs is pegged to the rapidly falling global oil prices.
How many tons MMTC will take will depend on the final delivered cost. Even if a low $270/mt CFR is achieved, sources say MMTC might take a minimum number of tons and wait for another tender in another week or so.
Industry observers said India was short by as little as 300,000 mt or as much as 500,000 mt for the rest of the season.
China: Chinese urea is once again being seen in the world market. The Chinese government reduced the export taxes on urea. The previous tariff of 25 percent that was augmented with a 150 percent duty has been lowered to 10 percent for Nov. 15 through the month of January. The duty will then rise to 35 percent, with a special export tax assessment of 110 percent for February through June and Sept. 1 through Nov. 15.
The duty and special assessments in the past were put in place to stem the rapid outflow of urea from the country. Farmers and local distributors complained of shortages at the beginning of last year’s application season.
Once the 175-185 percent duties were put in place, exports slowed to a trickle. For farmers, the move was a godsend. Prices dropped as availability increased.
Producers, however, were facing lower prices for their product just as the cost of inputs was taking off. Many of the plants were cut off from government subsidies and were forced to close, causing disruption in local employment figures.
The central government revamped the export duties in part to respond to the desire of producers to export and recoup their costs. The increased exports will also help keep the Chinese economy going just as it is beginning to feel the pinch from the global credit crunch.
In addition to the new tax rate, the government set a ceiling price for exported urea. The base cost under the plan is US$337/mt FOB. If the selling price is higher, a tax rate equal to 1.1-base/sales price times 100 is applied.
For now, the price is a fair distance away. Sources peg the current price at $275/mt FOB.
Middle East: Producers were not greedy in the most recent Indian tender. At the same time, they were not desperate. The offers in the MMTC/India tender indicate a drop of $10/mt from the last tender. Had the producers been desperate to sell, said one source, the price drop would have been substantially more. Had the producers been greedy, they would have raised their prices from the last tender.
Sources say reserves are building up in the producers’ holding areas. They are apparently anxious to move as many tons as possible as quickly as possible.
Until a final agreement is reached, sources say the offers as stated in the MMTC tender stand as the new market levels – $261-$263/mt FOB. Industry observers expect to see a couple of dollars shaved off those levels once an award is made.
Black Sea: While the Mideast price softens, the Black Sea price remains stable. Sources say the current market rate remains $240-$250/mt FOB.
If MMTC is successful in negotiating a lower delivered price with companies offering CIS tons, sources say the most the market will see is a softening of a dollar or two.
Producers in the area are said to be concerned about making sure enough tons get sold. Reserves are reportedly backing up at Yuzhnyy. Securing a large portion of the non-Mideast business in the MMTC tender would go a long way to easing pressure on the producers.
Pakistan: A tender for 250,000 mt closes Nov. 22. Just about all the major players are expected to offer tons in the tender, which calls for shipment to start in December.Sources expect to see slightly higher prices in the TCP tender. The low freight rates from the Mideast to Pakistan could allow the Arab Gulf producers to move up their FOB prices. Others said suppliers may also see Pakistan as more desperate to buy than India, and so may bump up the price without being too greedy.
Local sources report that the government is expecting a shortfall of 700,000 mt of urea during Rabi season. About Rs. 5 billion for subsidies has been allocated to meet the price difference. The Ministry of Food, Agriculture and Livestock has sought the release of an additional $200 million from the Prime Minister to cover the cost of the new tenders.
Bangladesh: BCIC closed its tenders for granular and prilled urea Nov. 19. The tender called for offers of 50,000 mt of prilled urea and 25,000 mt of granular.
BCIC granular tender
Local Agent
Supplier
Origin
Qty MT
US$/mt FOB
Freight US$/mt
Total US$/mt C&F
Bulk Trade International
Bulk Trade International
China/ Russia Indonesia/Ukraine
12,500 12,500
279.40 282.40
35.00 35.00
40.40 317.40
Suncult Business
Gavilon
China
25,000
299.80
29.18
329.23
R.K. Enterprise
Liven
China/ Malaysia
12,500
297.27
31.00
329.27
International Fertilizer Trading Corp.
Ameropa
China
12,500
288.00
45.73
334.23
Swiss Singapore
Swiss Singapore
China
12,500
333.00
11.00
344.00
Sources report Bulk Trade will most likely get the award for both of the company’s offered cargoes.
BCIC prill tender
Local Agent
Supplier
Origin
Qty MT
US$/mt FOB
Freight US$/mt
Total US$/mt C&F
Bulk Trade International
Bulk Trade International
China/Russia/Indonesia/Ukraine
12,500 12,500 12,500 12,500
272.20 278.20 283.20 285.20
35.00 35.00 35.00 35.00
307.20 313.20 318.20 320.20
International Fertilizer Trading Corp.
Ameropa
China
12,500 12,500
273.00 277.00
45.73 45.73
319.23 323.23
Swiss Singapore
Swiss Singapore
China
12,500
333.00
11.00
344.00
Agro Industrial Input
Wilson International
China/Egypt/Malaysia/Turkey
12,500
365.47
25.00
391.47
R.K. Enterprise
Liven
China/Indonesia
12,500
292.37
31.00
324.37
Helm
Helm
UAE
25,000
331.00
25.00
356.00
Union Mercantile
Toepfer
Qatar
12,500
304.00
60.05
364.35
* Industry sources
Sources report that International Fertilizer/Ameropa were approached and asked to lower their prices for at least one cargo. Reportedly, BCIC would be willing to buy more tons than called for in the tender if the price is right.
The large quantities of Chinese urea offered in the tenders are an indication that urea producers in China are anxious to get back into the global market, said one observer. The lowering of the export duty made the offers possible. Had the old 175 percent duty been in place – instead of the current 10 percent – the Chinese urea would have been way overpriced.
Industry observers do not expect to see a decision in these two tenders for at least a couple of weeks.
Indonesia: PIM closed its selling tender Nov. 18. The company was offering two lots of 5,000 mt each on a cash only basis. Reportedly, only one lot was sold at $254.75/mt FOB. At that price, sources say the material could easily be top-off tons for India, Pakistan, or Bangladesh.
NITROGEN SOLUTIONS
U.S. Gulf: There were no new reports of barge business last week, though offers to sell barges have reportedly been made at $250/st. Sources say this is in line with new business into the East Coast, where $280/mt DEL has reportedly been concluded. Indeed, sources now report that EC offers are $250/mt DEL.
While it could not be readily confirmed, sources said that all, if not almost all, exporters of UAN have now curtailed production.
While errors in DOC data are common, perhaps the largest one in some time was for September UAN imports. TFI noted that for September DOC reported that some 5,023,931 st came into the U.S. at a total price of $13,123,013, or $2.61/st. DOC has initiated an investigation to correct the matter. For September 2007, DOC has only 372,931 st of UAN coming into the U.S., with some 807,857 st coming in during the July-September 2007 period.
Eastern Cornbelt: The UAN-32 market was generally reported in the $10.00-$12.00/unit FOB range for spot market tons, although new sales were few to test the market. As with ammonia, the gap between spot market values and forward contract offers was wide. One supplier was referencing forward contract UAN-32 for December at $428-$438/st ($13.38-$13.69/unit) FOB regional terminals.
Western Cornbelt: UAN-32 was pegged in the $350-$380/st ($10.94-$11.88/unit) FOB regional terminals for spot sales, reflecting another big drop from last report.
Northern Plains: UAN was quoted at $11.00-$12.00/unit FOB regional terminals for spot tons, but there were no sales to test those numbers. One supplier was referencing forward contact UAN-32 for December as high as $440/st ($13.75/unit) FOB Pine Bend, Minn.
Northeast: UAN-30 was reported at $270-$289/st ($9.00-$9.63/unit) FOB in the region, with the Philadelphia market quoted in the $270-$278/st ($9.00-$9.27/unit) FOB range to the dealer last week. Urea tons out of Baltimore were generally quoted in the $280-$289/st ($9.33-$9.63/unit) FOB range. In upstate New York, the UAN-32 market was referenced at the $380/st ($11.88/unit) FOB mark to the dealer.
Sources said new indications of imported UAN-32 vessel tons were in the $250-$280/mt range on the East Coast, with the low for offers and the upper end reportedly for confirmed business.
Eastern Canada: The UAN-28 market was quoted at a nominal $540-$555/mt ($19.29-$19.82/unit) FOB regional terminals, which was basically unchanged from last report. One Ontario source pegged the UAN-32 dealer market at $632/mt ($19.75/unit) FOB for prompt tons.
AMMONIUM NITRATE
U.S. Gulf: U.S. September ammonium nitrate imports were off 38 percent, according to the DOC, to 71,640 st from the year-ago 115,886 st. July-September imports were also off 38 percent, to 160,078 st from 259,200 st.
Western Cornbelt: Ammonium nitrate remained in a broad range at $400-$510/st FOB in the region.
Eastern Canada: One Ontario supplier was reportedly referencing ammonium nitrate at the $635/mt FOB level for limited tons to the dealer in mid-November.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate remained at $200/st FOB in the region.
Western Cornbelt: Granular ammonium sulfate remained at the $200/st FOB mark from most location. One source said ammonium thiosulfate postings from one supplier had dropped more than $100/st, to $242/st FOB in the region last week.
Northern Plains: Granular ammonium sulfate was reported at $200-$205/st DEL in the region, with the low in North Dakota and the higher numbers in Minnesota and South Dakota.
Northeast: Sources tagged the ammonium sulfate market at $205-$230/st FOB, with the upper end FOB Philadelphia to the dealer. One source also reported revised prices for ammonium thiosulfate, with Nov. 18 postings at the $377/st DEL mark to certain locations in the region.
Eastern Canada: Ammonium sulfate was tagged at $545-$580/mt FOB in the region, reflecting a drop from last report.
U.S. Imports and Exports: TFI has asked DOC to investigate its AS export numbers, questioning some 1.5 million st of AS exports for the period January 2007 through September 2008. Just for September 2008, TFI questions some 143,465 st. TFI says the DOC numbers appear too high, according to industry sources, who indicate that actual exports were significantly lower. For now, DOC has September AS exports up 46 percent to 198,459 st, up from the year-ago 135,971 st. July-September exports are up 121 percent, to 638,222 st from the year-ago 288,248 st.
In the meantime, AS imports were 34,629 st during September, down 4 percent from the year-ago 35,976 st. July-September imports were off 19 percent, to 74,988 st from 93,101 st.
PHOSPHATES
Central Florida: It’s not a pleasant thought, but the silver lining of the dark cloud over the Central Florida DAP market may just be the coroner pulling the sheet over its head. If the market were any deader, it would have to be given a proper burial.
No offers, no bids, production curtailments, and inventories rising faster than hot air at a political convention – and no serious sign of when it will change. None. Some spoke of November, or early December, or the nebulous spring, but no one really knew. While it’s true farmers will need fertilizer to make money on their crops, its seemed certain less will be used. Dealers who stocked their bins with phosphates at over $1,000/st FOB will lose so much that some will not be able to survive.
As one producer said, “If some sales were being made, prices would be going down,” but nothing was going to change with no sales at all. To make matters worse, plants continued to curtail production, and it appeared Mosaic will go for the maximum amount of its planned cutback, around 1 million tons by the end of December, and that could be revised.
Rumors were rampant last week – and generally wrong. One held PCS Sales had taken all of White Springs offline and was doing the same at Aurora. Not so.
Late last week CF issued new prices, which were far lower than all previous prices in months, $490/st FOB. It appeared phosphate was reaching for a realistic level.
Based on a new price issued by CF, the Central Florida DAP price range fell some $275/st FOB, to $490-$500/st FOB, from $765/st FOB the previous week. CF had the lowest asking price, while at least one other supplier was reportedly referencing a $500/st FOB price for December shipments. PCS Sales was at $1,070/st FOB. Mosaic had no posted price for Central Florida. The most recent price for Agrifos was $755/st FOB for trucks and $750/st FOB for rail shipments.
U.S. Gulf: Activity on the Gulf river system was as still as a corpse, but very late last week CF issued new prices effective Nov. 21, which included Inola at $520/st FOB. Subtracting freight, throughput, and shrinkage would result in a NOLA DAP barge price of $490/st FOB – the same as the company’s new price for Central Florida.
The new price trumped a rumor that Transammonia had sold two NOLA DAP barges at $495/st FOB, which the company denied. That would have dropped the bottom range on the market by $5/st FOB, but CF’s actually was $10/st FOB, which goes to show truth is better than fiction.
The big question was whether CF’s move will jolt the market back to life. Actual new prompt sales in North America have been absent for around two months, as prices continued to plummet. The new big question was what would farmers do? And have prices moved to a realistic point farmers believe they can afford to buy and not lose money next season? Another question was – what will happen to dealers who bought and stocked up on phosphates in excess of $1.000/st FOB? Because the Thanksgiving Holiday was on the horizon this week, it may be another week before answers begin to emerge.
Before the CF news broke, a trader said some activity was beginning at Midwest warehouses, a slight uptick in prepaid deliveries, and said that it appeared “The light at the end of the tunnel is not a train.” Perhaps.
Based on CF’s new price list and other recent offers, the NOLA DAP barge range fell from to $500-$550/st FOB the previous week to $490-$500/st FOB. Mosaic had no posted price.
Eastern Cornbelt: Phosphate pricing continued to tumble, with sources quoting spot market values for DAP in the $680-$740/st FOB range in the region last week. MAP was roughly $25/st higher than DAP, but sources reported no new sales to test either range. What the floor is for phosphate pricing remains an open question. One supplier was referencing very limited forward contract DAP tons for December/January at $530/st FOB Peoria, Ill., late last week, reflecting a drop of some $300/st from the previous week.
The only spot quote for 10-34-0 was reported at the $920/st FOB mark in Illinois last week, reflecting a big drop from last report as well.
Western Cornbelt: DAP and MAP pricing continued to slide. Iowa sources pegged the warehouse market at $675-$700/st FOB, with some very limited spot business reported at both numbers last week. Some suppliers continued to put out numbers as high as $850/st FOB to the dealer last week, but no sales were taking place at that level.
The wild card was apparently forward contact DAP tons out of St. Louis, Mo., which were reported as low as $525-$530/st FOB for limited tonnage late in the week. The low end was for December and January deliveries, with the higher number for February through May shipments. Forward contract DAP FOB Inola was reported at $530/st for December and January, and $535/st for February through May. CF Industries issued new DAP prices effective Nov. 21, which included Inola at $520/st FOB.
MAP was $25/st higher than DAP out of regional warehouses. Limited forward contract tons FOB Inola were referenced at $555/st for December and January, and $560/st for February through May.
The 10-34-0 market was tagged at $880-$920/st FOB in the region, with the low in Nebraska. One Iowa source reported the dealer market at $900/st FOB last week.
Northern Plains: Most sources pegged the DAP market at $700-$740/st FOB regional warehouses to the dealer, with MAP $25/st higher. Reference prices for limited forward contract tons from one supplier, however, were reported at the $535/st level for DAP and $560/st for MAP FOB Pine Bend for December and January shipments. No current prices were reported for 10-34-0 last week.
Northeast: Phosphate pricing continued to drop. Sources quoted the DAP market last week at $825-$840/st FOB in the region, with the low end FOB E. Liverpool to the dealer. MAP was roughly $25/st higher than DAP. The 10-34-0 market was down as well, with sources pegging the market at $950-$1,050/st FOB in the region. The upper end reflected dealer postings out of terminals in upstate New York.
Eastern Canada: MAP was quoted at $1,295-$1,341/mt FOB, with DAP in a broad range at $1,280-$1,350/mt FOB in the region, depending on location. One Ontario source quoted the TSP market at the $1,340/mt FOB level for the most recent business.
U.S. Export: Although India was said to need between 300,000 mt and 400,000 mt of DAP to be shipped by the end of the year, sources last week said it sought 20,000 mt. Keytrade was said to have offered a price about $20/st FOB higher than the one it made to Ethiopia a week earlier, which would be around $555-$560/mt FOB. India may have been simply testing the waters to see how favorable a deal it could get in the seriously depressed world phosphate market.
Indications last week were that both India and Pakistan would be making buys sometime soon, but the market in general for phosphates remained bleak.
The Fertilizer Institute released its export report of phosphates for October. Naturally, India was the one bright spot for DAP sales, taking another 342,837 mt. Japan was a far distant second at 16,976 mt, with Brazil next at 12,156 mt. Total DAP exports in October amounted to 404,111 mt. For the calendar-year-to-date, India accounted for most of the exported DAP, 2,919,470 mt, which was an increase of 90.6 percent over the same period in 2007. Japan followed with 268,056 mt, and Australia was third at 168,236 mt. The total was 4,268,922 mt, which was an increase of 14.2 percent over last year.
Canada was the largest importer of MAP in October at 18,280 mt, with Australia next at 8,267 mt, and Japan following at 6,394 mt. Total MAP exports in October were 41,290 mt, a decrease of 72.4 percent compared to the same period last year. For the calendar-year-to-date, Canada continued to be the most active customer with 438,582 mt. Australia was second at 282,682 mt, and Brazil was the third largest at 276,688 mt. Total MAP exports to October were down 23.2 percent at 1,394,503 mt.
Based on recent offers, the export DAP price range last week was $533-$555/mt FOB, compared to the previous week’s range of $513-$535/mt FOB.
India: With low DAP prices, Indian buyers see no need to continue paying high prices for phos acid and phos rock. Sources report that Indians have stopped receipt of phos acid from North Africa and are renegotiating prices to US$700/mt CFR. However, settlements are still to be reported.
In the meantime, Somali pirates have made sure that phos acid has been in short supply in India, thereby cutting DAP production, as they captured three such vessels in the past few months. IFFCO told the Indian press that the Stella Maris and Stolt Strength, both carrying phos acid, had been seized, and their fate is unclear. In the meantime, a ransom was reportedly paid for the Stolt Valor, also carrying phos acid, and the vessel was expected to make it into Kandla Nov. 23, some two months late.
POTASH
Eastern Cornbelt: Potash was quoted at $800-$850/st FOB regional warehouses, depending on grade and location.
Western Cornbelt: Potash was reported in the $750-$850/st FOB range in the region, with the low out of Iowa warehouse locations on a spot basis. Most sources continued to quote the common dealer level at the $800/st FOB mark or higher in the region last week.
Northern Plains: Potash pricing FOB Saskatchewan mines remained at reference levels of $767/st FOB for standard, $780/st FOB for soluble, $772/st FOB for granular, and $780/st FOB for white granular. Out of regional warehouses, the market was quoted at $800-$860/st FOB, depending on grade and location.
Northeast: The potash market was quoted at $850-$870/st FOB and $888-$895/st DEL in the region. The upper end of the FOB range was reported at E. Liverpool for granular tons, while the upper end of the DEL range was for soluble potash on a spot basis.
Eastern Canada: Potash remained at posted levels of $932/mt FOB Sussex, N.B., for the month of November, with a $100/mt increase slated for Dec. 1 to more closely align with U.S. pricing based on current exchange rates. The same was true of Saskatchewan potash pricing to Canadian customers, which stood at $888/mt FOB for red granular potash last week and was slated to firm to $988/mt FOB in December.
Potash pricing out of Ontario warehouse locations was quoted in the $940-$965/mt FOB range last week, depending on grade and location, with the upper end for white granular potash. One source also quoted rail-delivered red granular potash at the $973/mt level to his location last week.
The K-Mag market was quoted at $525/mt FOB, and sulfate of potash was reportedly referenced at the $1,021/mt FOB level in Ontario.
U.S. Imports: Potassium muriate imports were up 3 percent in September, according to DOC, to 917,907 st from the year-ago 888,438 st. July-September imports were up 4 percent to 2.44 million st from 2.33 million st.
SULFUR
Tampa: As phosphate companies continued to curtail production, sulfur inventories on the Gulf of Mexico grew rapidly. The situation was becoming a serious burden for the oil industry, because storage capacity was disappearing as fast as the price of sulfur was coming down. Because of the sulfur situation, refineries may soon have to curtail their own production, although those inventories were also growing, as Americans were driving considerably less than they usually do. The move would not be likely to impact the price at the pump, which was just a bit of almost good news.
The two prillers on the Gulf have a processing capacity of about 4,000 lt a day, and another 3,000 lt could be blocked at Galveston, for a total of around 7,000 lt a day.
Phosphate producers were said to be asking for a voluntary reduction in supplies under their sulfur contracts, due to reduced production.
A sulfur industry source expressed anger at the phosphate industry for the problems with both phosphate sales and the glut of sulfur, berating phosphate for greed during the price run-up during the past year. If it had not attempted to make such huge profit margins on its product, buyers would have continued to buy and the current dead status of the phosphate market would never have occurred, the source said. However, sulfur prices also rose, actually by an even larger percentage than phosphate prices. That, the source said, was justified because it was based on demand, but so was the price of phosphate.
Railcars were said to be continuing to build in Central Florida, as phosphate companies struggle to store the sulfur they have ordered.
West Coast: Some, but not all, contracts on the West Coast were being settled last week, and the new prices were basically negative, ranging from zero to minus $30/mt, as oil producers in California struggled to find a home for their waste product.
Vancouver: Freight rates to China were down last week, which meant Canadian suppliers will be able to keep more of the $55-$60/mt DEL under their new contracts. As long as oil prices stay down, their situation should be more favorable.
U.S. Imports: September imports were up 9 percent, to 177,941 st from the year-ago 162,593 st, according to the DOC. July-September imports were up 44 percent, to 677,385 st from 469,855 st.
MARKET NOTES
Germany: Industrial giant BASF announced Nov. 19 that it is temporarily shutting down around 80 plants worldwide. It is also reducing production at approximately 100 plants, including caprolactum. Scheduled maintenance work is being brought forward. BASF said customer demand in key markets has declined significantly. It estimates that some 20,000 employees will be affected by the production cuts. BASF said in 2008 it will not achieve the positive results of 2007. “How the coming year will develop is difficult to foresee,” said Dr. Jurgen Hambrecht, BASF chairman of the board. “BASF is preparing for tough times.”
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.
