All Posts from February 24, 2017

Transportation

Illinois River, Lower Mississippi River, Market Watch, Ohio River, Transportation, U.S. Gulf, Upper Mississippi River

U.S. Gulf: Fog conditions were much improved on the Gulf last week, shippers said. Scattered reports of 4-6 hour fog-related delays continued, however.

Shippers put Industrial Lock wait times in the 8-18 hour range last week, and Bayou Sorrel Lock waits were said to be nine hours. Passage through Algiers Lock was quoted at three hours, while Port Allen Lock required 5-7 hours to navigate.

Pipeline burial in the West Canal’s Matagorda Bay area (Mile 471) has been extended through March 4, sources said. The area opened to daylight transit on Feb. 18, but navigation will remain unavailable between 6:00 p.m. and 6:00 a.m. nightly until work concludes.

Harvey Lock and Bayou Boeuf Lock are tentatively scheduled to undergo long-term shutdowns beginning in August. Both projects will involve dewatering the locks, leading to 60-day closures. Bayou Boeuf could still be pushed back to 2018, sources said.

Brazos Lock continued to operate under a fog warning last week.

Mississippi River: Delays at the Chain of Rocks Lock were noted as high as 24 hours on Feb. 21-22, sources said.

Fog delays reappeared on the Upper Mississippi, forcing delays of up to 10 hours per incident. Pickup and drop-offs were expected to lag as a result. Snowfall totaling 6-12 inches forecast for Feb. 23-24 could prompt further delays, sources warned.

Lock 21 operations are scheduled to return to normal on Feb. 28. Transits are currently running on a 70-foot width restriction, forcing triple-wide tows to stage barges and make multiple runs through the lock. Tow haulage equipment is also unavailable, and an assist boat is required for entering and exiting the lock.

Cape Girardeau, Mo., levels were on the rise last week, further clouding the Corps’ planned Thebes, Ill., rock removal project timeline. Depths registered 18.24 feet and rising on Feb. 22, above the 15-foot maximum required by the Corps for work to begin.

Tows bound for the mid-Mississippi River are expected to begin departing the St. Louis area in the first week of March, shippers reported. Upper River locks are set to begin reopening on March 3-4.

The Corps expects the Missouri River to open for the navigation season on April 1.

Illinois River: Foggy conditions persisted in the Illinois waterway, forcing tows into waiting mode for up to 10 hours at a time.

Starved Lock was closed from 8:00 a.m. through 4:00 p.m. on Feb. 22 for dive operations. LaGrange Lock continued to pass boats without locking last week, but falling water levels forced Peoria to raise its dams, triggering delays of six hours or more.

Miter gate replacement will force intermittent transit shutdowns at Peoria Lock on May 17-30. Starved Rock Lock navigation will be unavailable June 1 through July 7, and LaGrange Lock maintenance scheduled for June 1 through Aug. 29 will trigger width restrictions and intermittent shutdowns.

Ohio River: Fog delays were quoted in the 4-10 hour range for the week, leading to shipper warnings of delayed deliveries.

Dashields Lock quoted average delays in the 10-11 hour range on Feb. 22, while Meldahl Lock waits were called 9-10 hours. J.T. Meyers Lock saw delays of 8-9 hours, and Smithland Lock waits were described up to six hours. Continued high water levels allowed dams to stay down at Locks 52-53, where lock operators passed vessels without locking.

Work on the New Cumberland Lock auxiliary chamber, underway since Feb. 6, is scheduled to run through March 17. Additionally, the main chamber could see intermittent shutdowns, shippers warned. Markland Lock auxiliary chamber transit will be unavailable March 6 through April 26.

Looking ahead, the Meldahl Lock main chamber will go offline for repairs May 1 through Sept. 29, with substantial delays anticipated.

Repairs on the books for Feb. 22 through March 9 for the Cumberland River’s Barkley Lock will likely trigger sporadic transit delays, shippers said. The Allegheny River’s Lock 6 is closed until further notice due to a hydraulic leak, effectively closing the river.

The Monongahela River’s Braddock Lock and Dam river chamber remains unavailable for use due to an ongoing equipment failure. The lock will be closed March 27 through April 28 for repairs. Charleroi Lock will shut down for weekday transit May 14 through June 20 for concrete and ladder repair. Navigation will continue on weekends while the project is underway.

The Tennessee River’s Wilson Lock is operating without traffic signals on both the lock’s upper and lower sides through March 3. Wilson lock is also set to experience 10-hour closures on March 1-3, followed by additional 10-hour shutdowns spanning April 17 through June 8. Kentucky Lock will close to transit March 7 through April 10, and see random delays Feb. 21 through April 30.

Vale swings back to profit, records $1.74 B fertilizer impairment

News

Vale SA reported a 2016 net income of $3.98 billion on net operating revenues of $29.36 billion. This contrasts to the net loss of $12.13 billion and revenues of $25.61 billion posted in 2015. The company attributed the financial turnaround to higher EBITDA ($5.1 billion), bigger gains on foreign exchange and monetary variation ($10.63 billion), and lower impairment of non-current assets and onerous contracts ($6.01 billion). This was partly offset by higher taxes due to the reporting period’s higher earnings.

Underlying earnings were a positive $4.97 billion in 2016, against a negative $1.70 billion in 2015.

Net operating revenues were 15 percent higher year-on-year in 2016, mainly because of higher realized prices and sales volumes of iron ore fines and pellets and higher base metals volumes, but were partly offset by lower prices of the latter commodities.

Last year, Vale’s earnings were badly hit by the downturn in commodity prices, especially of iron ore, and substantially higher impairment charges.

In 2016, impairments of non-current assets and onerous contracts led to non-cash losses of $2.91 billion, compared to $8.93 billion in the prior year. Vale, which has been shedding assets in order to pay down debt, recorded a $1.74 billion impairment in fourth-quarter 2016 as a result of the agreement in December to sell the bulk of its fertilizer assets to The Mosaic Co. for $2.5 billion (GM Feb 10, p. 13; Dec. 23, 2016).

Vale’s Fertilizers business segment saw its 2016 adjusted EBITDA plummet 63 percent, to $209 million on net operating revenues of $1.875 billion, compared with 2015’s $567 million and $2.225 billion, respectively. Fertilizers’ fourth-quarter 2016 adjusted EBITDA was more than halved compared with the same year-ago quarter, to $48 million on net operating revenues of $429 million, against fourth-quarter 2015’s $117 million and $481 million, respectively. Vale’s Fertilizers business contributed 1.7 percent of the group’s adjusted EBITDA in 2016, down from eight percent in 2015.

The Brazilian company confirmed last week it had restarted its hunt for a buyer for its Cubatão-based nitrogen and non-integrated phosphate businesses, which were not included in the sale agreement with Mosaic (GM Feb. 17, p. 16). Yara International ASA earlier had been mentioned as a possible buyer for the Cubatão assets (GM Sept. 23, 2016; April 8, 2016), but is said to have withdrawn its interest in November “after several months of talks.” Yara has said it does not comment on speculations or rumors. In the meantime, CF Industries Holdings Inc. told analysts Feb. 16 that it has no interest in Vale’s assets.

The purchase of Vale’s partially-constructed Rio Colorado, Argentina, potash project remains an option for Mosaic as part of its transaction with Vale (GM Dec. 23, 2016). The Argentine mining project’s inclusion is subject to Mosaic’s agreement following appropriate diligence.

WSU pursues NH3 production research

News, News Briefs

Wichita—An anhydrous ammonia production project at Wichita State University (WSU) has received an $855,000 federal grant from the U.S. Department of Energy (DOE)’s Advanced Research Projects Agency-Energy (ARPA-E). A team led by Shuang Gu, assistant professor of mechanical engineering, will pursue the project, Alkaline Membrane-Based Ammonia Electrosynthesis with High Efficiency for Renewable and Scalable Fuel Production.

The goal is to demonstrate a method for creating ammonia from air using a hydroxide-exchange membrane (HEM) powered by renewable electricity. Researchers said current methods of generating ammonia are energy-intensive and suffer from inefficiencies that drive-up costs.

“Our recent breakthroughs in electrochemical materials enable us to demonstrate a novel technology with a great potential and a logical pathway of efficiently producing ammonia as liquid fuels from renewable energy sources,” said Gu.

The ARPA-E award is from the Renewable Energy to Fuels through Utilization of Energy-Dense Liquids (REFUEL) program, which seeks to develop scalable technologies for converting electrical energy from renewable resources, specifically energy-dense carbon-neutral liquid fuels that can be converted back into electricity or hydrogen on demand. The REFUEL program is providing $35 million to 16 projects.

The NH3 Fuel Association sees ammonia as a proven fuel source with a 75-year safety record that works efficiently in a range of engine types, including internal combustion engines, combustion turbines, and direct ammonia fuel cells, creating zero carbon emissions. While backers of the fuel concede that energy-dense fuels are currently economical, they remain partially reliant on imported petroleum and are highly carbon intensive.

 

 

USDA sees record soybeans, less corn for 2017

News, News Briefs

Washington—At the opening day of its 2017 Outlook Forum on Feb. 23, USDA projected the 2017 U.S. soybean crop to reach a record 88 million planted acres, up 4.6 million acres – or 5.5 percent – from last year’s crop. The 2017 corn crop is projected at 90 million planted acres, down 4 million acres from last year, according to USDA Chief Economist Robert Johansson.

The U.S. wheat crop is projected at 46 million acres, down 8.3 percent from last year, while rice acreage in 2017 is expected to decline 17 percent, to 2.6 million planted acres. The U.S. cotton crop for 2017 is projected at 11.5 million planted acres, up 1.4 million acres – or 14 percent – from last year, and potentially the largest cotton crop in the country since 2012.

Overall acreage for the eight major commodity crops is projected at 249.8 million acres, down 1.4 percent from the 2016/17 marketing year. As for crop prices, USDA projected the average corn price at $3.50/bushel, up roughly three percent from the 2016/17 marketing year; soybeans at an average price of $9.60/bushel, up roughly 1.1 percent from the current marketing year; wheat at an average price of $4.30/bushel, up 12 percent from the current marketing year; and cotton at an average of 65 cents/pound for 2017, down four cents/pound from last year.

Johansson said net farm income in 2017 is projected at $62.3 billion, down from $68.3 billion in 2016, and reflecting a drop of almost 30 percent since 2013. U.S. farm exports, however, are forecast at $136 billion, up $2 billion from USDA’s previous estimate.

Urea

Black Sea, China, Eastern Cornbelt, India, Indonesia, Market Watch, Middle East, Pakistan, South Central, Southeast, Southern Plains, U.S. Gulf, Urea, Western Cornbelt

U.S. Gulf: Granular prompt granular barges continued to weaken last week, trading as low as $219/st FOB before rebounding back into the mid-$220/st FOB. Early week trades were reported to have been as high as $232/st FOB. The $219-$232/st FOB range compares to the prior week’s $230-$242/st FOB.

Several factors were cited for the drop. There were reports of Chinese barges in the market that were competing with other tons. In addition, an early spring ammonia run in the heartland was thought to put pressure on urea and UAN going forward. Others cited lackluster demand on international markets, including India and Brazil.

Coming into 2017, the fertilizer year-to-date is some 1.1 million st behind on urea imports. At one point, that factor was believed to be giving the market legs in the light of delayed new domestic production.

The prill market was hard to peg. While sellers were quoting as high as $255/st FOB for feed-grade material and in the $240s/st FOB for melt-grade, sources doubted that those numbers were attainable in light of lower granular prices. As a result, the market was called $235-$240/st FOB.

Eastern Cornbelt: The granular urea market remained in the $275-$290/st FOB range in the Eastern Cornbelt, with the upper end inland and the low reported at Cincinnati, Ohio, and other river locations.

Western Cornbelt: The granular urea market was pegged at $275-$285/st FOB in the Western Cornbelt, with the low confirmed in St. Louis, Mo., and the upper end out of Iowa terminals.

Southern Plains: The granular urea market was pegged at $270-$275/st FOB Catoosa, Okla., down $5-$10/st from last report. Urea pricing out of the Houston, Texas, market continued to be quoted at the $285/st FOB level at the upper end of the regional range.

South Central: Granular urea prices had reportedly slipped to $270/st FOB Memphis and Little Rock, Ark., down $5-$15/st from last report, while reference prices in the Kentucky market remained in the $280-$285/st FOB range for prompt tons. Postings out of Convent, La., were also reported at the $285/st FOB level at mid-month.

Southeast: The granular urea market remained at $295-$305/st FOB port terminals in the Southeast.

Middle East: Egypt sold about 30,000 mt of urea this week at $260/mt FOB. This is significantly lower than the producers’ expectations of $270-$280/mt FOB.

The most likely buyers of the Egyptian product are in Europe, said sources. Even at $260/mt FOB, industry watchers said the price is too high to go to another market.

Arab Gulf producers argue that the price should be $275-$280/mt FOB. However, prices settled around the globe point to much lower numbers. Even the $270/mt FOB that traders refer to as the current “realistic” price seems high to many in the industry.

Sources said Brazilian business recently done at $260/mt CFR has an estimated netback to the Arab Gulf of $240/mt FOB. At the same time, the price of Arab product has been matching the Chinese granular price, which is still pegged in the upper-$260s/mt FOB. The latest Indonesian price of $252/mt FOB also points to an Arab Gulf price in the upper-$250s/mt FOB.

To add more shade to producers’ expectations, sources report that the paper market has already moved the March price into the upper-$230s/mt FOB, an almost $10/mt drop in one week.

Some of the softness in the Arab pricing is coming from the end of the U.S. season, along with softening NOLA prices. At the same time, Brazil is being aggressive in its desire for lower prices, including a willingness to sit back and wait for softer prices. And lastly, the absence of India from the global market is leaving excess tons with no place to go.

In Algeria, the Sorfert plant has cut back on urea production while minor maintenance work takes place. Sources reported that the plant should be back up and running by this weekend or early next week at the latest.

Indonesia: Early this week producers tried to sell 60,000 mt of granular with a floor price of $265/mt FOB and 30,000 mt of prills for no less than $255/mt FOB. When the highest bids were only $250/mt FOB for granular and $230/mt FOB for prills, the Indonesian bean counters looked at their numbers again and dropped the reserve prices.

In the end, a floor price of $250/mt FOB for the granular got five companies to bid $252.25-$255/mt FOB for the granular product.

Buyer Quantity (mt) US$/mt FOB
Asia Gran Universal 30,000 252.25
Brio Agrichem 10,000 252.25
Samsung 6,000 255.00
Daewoo 6,000 255.00
Eurochem 6,000 255.00

Initial reports that Ameropa also took 20,000 mt now appear to have been just a rumor.

No prilled sales were reported.

Sources said it is not clear if Daewoo will be awarded the full 6,000 mt, or only a portion of the offered tons.

Industry watchers will now be paying attention to what happens to the prilled urea. One trader said if the leftover tons are offered immediately, the selling price will be lower still. Another trader offered the idea that holding on to the tons for a later sale will not only result in lower prices, but dramatically lower prices. Industry sources point to the lack of any major buyer in the global market for the next month or so as the prime mover in the lower price expectations of buyers.

China: Sources report that the domestic market is still strong enough to keep prices steady, even as international demand is off.

Sources put granular at $265-$270/mt FOB. Some traders are calling the market in the upper-$250s/mt FOB. One trader said sub-$260/mt FOB might be available for late March material, but anything going out in the first half of March is definitely in the $260s/mt FOB range. Industry watchers said the diverse pricing ideas for Chinese granular could be written off to the lack of international demand for that product.

Prills are pegged in the low-$230s/mt FOB.

National production has reportedly hit 60 percent and is climbing. Sources said the increased tonnage is being quickly snapped up by domestic buyers.

India: International traders seem united in the view that no new tender will be called until late March. Sources said the current reserves are sufficient to cover domestic demand until the new fiscal year starts April 1.

Sources said the industry remains confident that a tender will be called before the new fiscal year starts. Traders point to the assurances by the Indian government that the urea subsidy will not be reduced in the next year. In fact, the government has publicly stated that the urea subsidy for the next fiscal year will not be changed from the current year.

The government continues to push for more Indian companies to either build new urea plants, upgrade existing plants, re-open shuttered plants, or come to an arrangement with offshore producers for exclusive imports rights. Subsidies for upgrading or building new domestic production are tied to significant investments by the companies.

Black Sea: A sale of 10,000 mt out of Ukraine at $247.50/mt FOB helped set the new price out of Yuzhnyy. Sources speculated that the early March cargo is bound for Turkey.

Pakistan: Engro Fertilizers Ltd., Pakistan’s leading urea producer and DAP importer, reported an after-tax profit of PKR9 billion for calendar year 2016, compared with PKR15. 02 billion for 2015.

Engro reported an 18 percent year-over-year drop in net sales, fueled by a 12 percent drop in urea sales to 1.653 million mt in 2016, and a 23 percent drop in NP sales to 52,000 mt. DAP sales for 2016 surged to 528,000 mt, however, up 35 percent from the prior year.

As for prices, Engro said average urea prices fell 16 percent from 2015, to PKR1,614/50kg bag, while DAP prices fell 22 percent year-over-year, to PKR2,847/50kg bag in 2016.

Tessenderlo Group – Management Brief

Management Briefs

Tessenderlo Group, Brussels, announced Jan. 30 that Steve Azzarello has joined Tessenderlo Kerley Inc. (TKI) as CEO and will be based at TKI’s Phoenix headquarters. He takes over from Luc Tack, who will become TKI executive president. Tack served as CEO and president in an interim role after CEO and President Jordan Burns opted to retire (GM Feb. 2, 2016) after some 20 years in senior management.

The company said Azzarello brings more than 30 years of business expertise in general management, strategic planning, sales and marketing, and operations. Most recently, he was executive vice president at H.J. Baker Inc. He has also served as vice president, commercial development, at Amcol International, a multinational company with interests in the chemical and industrial minerals sectors.

Azzarello holds an MBA from Kellogg at Northwestern University and a B.S. in Chemical Engineering from Michigan Tech University.

In other management news, at TKI’s crop protection unit, NovaSource, Group Vice President David Cassidy retired effective Jan. 13, 2017. He had been with TKI since 2004. Jon Akins has taken over for Cassidy. He joined TKI in 2010 as vice president of regulatory and government affairs.

Sulfuric Acid

Australia, Market Watch, Sulfuric Acid, U.S. Gulf

U.S. Gulf: Sources put the Gulf import market at $40-$45/mt CFR for vessels, unchanged from the prior week. Brazil was called $45-$50/mt CFR, and tons offered from smelters located in Northwest Europe ran $5-$10/mt FOB, both flat from the previous report.

Chile was called $40-$45/mt CFR based on availability from Peru.

Planned second-quarter maintenance is expected to tighten domestic supply, sources argued, potentially firming both domestic and import pricing. Recent business was noted in the $85-$95/t DEL range for the Gulf region, while material destined for the Midwest was quoted at $80-$90/t DEL. Tons sold to West Coast buyers were reported at $100-$110/t DEL.

Australia: Alcoa Inc.’s Portland, Victoria, aluminum smelter will continue operating thanks to a four-year rescue deal brokered with the state and federal governments. The agreement will provide approximately $21.2 million in federal funds. In return, Alcoa agreed to extend operations through at least 2021.

The state of Victoria will also contribute to the bailout. State officials declined to reveal an exact figure, but local reports put the total at more than $155 million.

Alcoa reportedly considered closing the facility after a power outage damaged the smelter in December, reducing production to approximately 50 percent of the plant’s 300,000 mt/y capacity. Alcoa estimated that six months of repairs are needed to return the plant to full capacity.

Rentech seeks strategic options

News, News Briefs

Los Angeles—Rentech Inc., which sold off the bulk of its fertilizer assets in 2016 as it continued to move into the wood fiber processing and wood pellet production businesses, said Feb. 21 that it is exploring strategic alternatives for the company as a whole, as well as its Wawa, Ont., facility, where it has suspended operations. In addition, it is reducing production levels at its Atikokan, Ont., plant, and reported continued sluggish pellet sales at New England Wood Pellet.

The company said that a customer plans to exercise an option to purchase two Rentech-owned mills in the U.S. Rentech still owns some fertilizer assets, namely units in CVR Partners LP, which bought its East Dubuque, Ill., nitrogen plant. The company told Green Markets that it still owns approximately 7.2 million units in CVR Partners, which has 113.3 million outstanding units. Rentech said it provided some 17 million units to a major lender in April 2016 to retire some obligations, and that the lender has been selling their units.

Specialty

Market Watch

Plymouth, Minn.: Sales volumes for The Mosaic Co.’s MicroEssentials product line were up 29 percent in 2016. Mosaic recently completed the expansion of MicroEssentials capacity to 3 million mt/y, and increased sales in 2016 to 2.3 million mt, compared to 2015’s 1.78 million mt and 2014’s 1.85 million mt.

In addition to domestic sales, these totals include sales made by the company’s International Distribution segment. Significant sales were made into Brazil, with the company expecting to continue servicing that demand from its Florida operations in the near-term, even though it plans to acquire major assets of Vale SA. Mosaic said that eventually it may construct MicroEssentials production in Brazil.

By comparison, Mosaic’s overall phosphate sales volumes for 2016 were up only three percent, to 9.68 million mt from 2015’s 9.345 million mt.

Zellwood, Fla.: Anuvia Plant Nutrients reported that The Andersons Plant Nutrient Group, Maumee, Ohio, will serve as a distributor of Anuvia’s flagship product GreenTRX ™ 16-1-2-17S-3Fe for the Florida golf, sports turf, lawn care, and landscape markets. The product is available in three sizes – granular 250 SGN, intermediate 140 SGN, and elite 80 SNG – with the small-sized granules produced specifically for golf course greens and fairways.

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