All Posts from October 28, 2013

Looming CN Rail strike raises concerns for Canadian fertilizer industry

Featured, News

A labor dispute between the Canadian National (CN) Railway Company and the Teamsters Canada Rail Conference (TCRC) has left the Canadian fertilizer industry with concerns about a possible strike or lockout by the end of October.

Contract negotiations between CN and TCRC, which represents 3,300 conductors, trainmen, yardmen, and traffic coordinators, broke down on Oct. 7, but collective bargaining reportedly resumed on Oct. 21 with the help of a federally appointed mediator. At issue, according to TCRC, are demands by CN management to reduce limitations on when trains can be operated without a brakeman, and also to extend by two hours the period that crews are sometimes required to work in one shift.

“The company refers to this as an increase in productivity,” said a TCRC spokesman in a statement to CBC News. “We see it very clearly as requiring an employee to perform more work for more hours, which will end up with fatigued employees operating dangerous equipment, and that’s when accidents are likely to happen.”

Recent rail accidents in Canada – including the deadly derailment in July of a 74-car freight train carrying crude oil in Lac-Mégantic, Quebec, and the more recent derailment on Oct. 19 of 13 CN railcars carrying propane and crude oil west of Edmonton, Alberta – have focused scrutiny on Canada’s rail industry and prompted calls for enhanced safety measures (GM Aug. 19, p. 1). According to CBC News, CN has stated that none of its bargaining proposals with TCRC would “in any way compromise the health and safety of TCRC members.”

If an agreement is not reached by the time the mediation period expires at midnight on Oct. 28, a lockout or strike could commence within 72 hours.

“The Canadian Fertilizer Institute (CFI) is concerned about the potential of a CN Rail strike,” CFI told Green Markets last week. “Rail service disruptions are damaging to the Canadian economy in general and Canadian export industry in particular. Even the threat of a strike has serious repercussions on the Canadian economy and on the reputation of our exporters in foreign markets as buyers move to other sources of supply.”

An earlier dispute over wages in 2007 (GM Feb. 12, 2007) between CN and the United Transportation Union-Canada (UTU) resulted in a 15-day strike by some 2,800 UTU members. The 2007 walkout occurred in February, right as the Canadian fertilizer industry was gearing up for the spring planting season and Canadian potash producers were transporting tons to Vancouver to fulfil the export requirements of Canpotex (GM March 5, 2007).

As a result, the 2007 strike prompted demands from CFI, fertilizer producers, and other impacted industries for the Canadian government to intervene quickly by passing back-to-work legislation to end the impasse (GM Feb. 26, 2017). A spokeswoman for Labor Minister Kellie Leitch said last week that the government is closely monitoring the current dispute between CN and TCRC, and is urging both parties to continue negotiations.

“The Canadian fertilizer industry faces an annual logistical challenge of moving 25 million tonnes of product,” CFI said last week. “CFI members simply cannot afford the repercussions of a rail disruption.”

Mosaic to acquire Florida phosphate business from CF

Breaking Industry News

The Mosaic Company on Oct. 28 announced that it has signed a definitive agreement to acquire the phosphate business of CF Industries Inc. for $1.2 billion in cash plus $200 million to fund CF’s asset retirement obligation escrow.

Under terms of the agreement, Mosaic would acquire the 22,000-acre South Pasture phosphate mine and beneficiation plant in Hardee County, Fla., a phosphate manufacturing facility in Plant City, Fla., and ammonia terminal and finished product warehouse facilities in Tampa. The CF facilities currently produce approximately 1.8 million mt of phosphate fertilizer per year, which would be additive to the annual 8.2 million mt currently produced by Mosaic.

The acquisition is expected to add approximately $0.30 per share to Mosaic’s 2015 earnings per share, excluding any debt financing costs and any changes to outstanding share count.

The proximity of CF’s South Pasture mine to Mosaic’s planned Ona phosphate mine in Hardee County would allow Mosaic to take advantage of the synergies associated with the combined mining assets. The existing infrastructure at South Pasture would result in Mosaic saving approximately $500 million by not having to construct a $1 billion beneficiation plant. Mosaic would instead invest approximately $500 million to develop phosphate rock reserves and improve existing mines.

Mosaic and CF also signed strategic supply agreements under which CF will provide Mosaic with up to approximately 1.0 million mt per year of ammonia. Under one agreement, Mosaic will purchase up to 725,000 mt annually for 15 years with pricing based on a formula tied to the prevailing price of U.S. natural gas. This agreement is expected to commence prior to January 2017. Under a second agreement, Mosaic will purchase approximately 270,000 mt annually for three years from CF’s Trinidad operations at CFR Tampa market-based pricing.

In light of these supply arrangements, Mosaic has decided to forego its proposed ammonia manufacturing plant at its Faustina, La., phosphate facility, saving approximately $1.1 billion in future capital expenditures.

“Uniting CF Industries’ phosphate operations with Mosaic’s creates an ideal combination that provides the opportunity for enhanced operating efficiencies and sustainability efforts, lower production costs and reduced capital investment–creating value for our shareholders, customers and employees,” said Mosaic President and CEO James T. Prokopanko. “The addition of these new phosphate assets and securing access to long-term ammonia supplies solidifies Mosaic’s position among the largest and best phosphate producers in the world.”

The phosphate acquisition would be additive to Mosaic’s existing Florida operations, and complements the company’s plans to mine phosphate rock reserves in Hardee and Desoto counties and extensions of the existing Wingate mine.

“We are thrilled to add CF Industries’ Florida phosphate employees and facilities to the Mosaic family,” said Gary N. "Bo" Davis, Mosaic senior vice president, Phosphate Operations. “We look forward to working together to help the world grow the food it needs while strengthening our operations and deep commitments to the Central Florida communities where our employees live and work.”

In total, the transactions are expected to favorably impact Mosaic’s future capital expenditures. In addition to the $1.4 billion total consideration in connection with the acquisition, Mosaic expects to spend an estimated $500 million to develop reserves and improve existing mines, and an estimated $200 million on marine assets to transport ammonia from Louisiana to its Florida facilities.

The estimated $2.1 billion of investments and capital expenditures is expected to be offset by an estimated $2.1 bill

The Week in Fertilizer Stocks

Fertilizer Stocks

The Week in Fertilizer Stocks


Producer Symbol Price Week Ago Year Ago
Agrium AGU 86.18 85.76 107.13
CF Industries CF 210.13 209.54 205.00
CVR Partners UAN 19.51 18.75 27.07
Intrepid Potash IPI 15.23 15.92 21.83
Mosaic MOS 45.64 46.51 53.21
PotashCorp POT 31.06 32.10 40.59
Rentech Nitrogen RNF 29.32 28.87 36.40
Terra Nitrogen TNH 211.64 204.84 216.49
Distribution/Retail
Andersons Inc. ANDE 72.85 70.80 35.63
Deere & Co. DE 84.28 83.65 84.31
Scotts SMG 58.38 57.02 41.96

Uralkali cuts dividend 53 percent

News, News Briefs

Berezniki — OAO Uralkali said Oct. 23 that it was cutting its first-half dividend by 53 percent to 2.21 rubles per share, down from the year-ago 4.71 rubles. This is in line with Uralkali’s 53 percent drop in profits during the first half (GM Sept. 16, p. 1). And while Russia has indicated that it will charge Uralkali CEO Vladislav Baumgertner and seek his extradition from Belarus (GM Oct. 21, p. 11), this may not be enough to gain his release. Belarus President Alexander Lukashenko has since indicated that the country should be compensated prior to the release. In addition, Belarus may also be waiting for Uralkali’s main shareholders, led by Suleiman Kerimov, to sell their stake prior to a release. While there has been much speculation surrounding a possible sale, nothing firm has been announced. In other news last week, the new Belarus-controlled Belarusian Potash Co. announced that it has appointed Dmitry Artiomenko as its new official representative in Singapore.

LSB Pryor complex goes offline

Breaking Industry News

LSB Industries Inc. reported Oct. 24 that its Pryor, Okla., nitrogen facility went offline in October and is not expected back up until mid-November. The plant which can produce up to 700 st/d of anhydrous ammonia and 325,000 st/y of UAN, is a key economic driver for the company. LSB explained that the facility went down to perform unplanned maintenance which was indicated by newly-installed diagnostics equipment. LSB also sought to improve equipment reliability. Since the shutdown, LSB said the scope of the maintenance activities have increased as mechanical issues and opportunities for plant performance improvements were identified.

Ammonia

Ammonia, Aqua Ammonia, Black Sea, California, Eastern Cornbelt, Market Watch, Middle East, Pacific N.W., Tampa, U.S. Gulf, Western Canada, Western Cornbelt

U.S. Gulf/Tampa: Tampa ammonia prices for November slipped $10/mt from October, to $480/mt CFR. Sources had generally anticipated some pressure on prices, citing expectations that CIS plants would be returning to production, as well as capacity from the new Sorfert plant in Algeria. The first cargo from that plant was reported to have gone to The Netherlands.

While some believe Trinidad supplies may be getting back to normal in November, there were reports that there might be a two-week partial curtailment during the month. During October at least three producers – PotashCorp, Yara, and AUM – took turnarounds, which helped offset gas curtailments. Last week, Yara’s Tringen 2 was slated to come back up from a turnaround, while PotashCorp recently brought back up one plant and will put another on turnaround status for part of November.

November NYMEX natural gas closed Oct. 24 at $3.639/mmBtu, down slightly from the week-ago $3.727/mmBtu.

Eastern Cornbelt: Eastern Cornbelt growers were getting steady reminders that the fall window is narrowing for the completion of harvest and the application of fertilizer.

Frost advisories and freeze warnings were in effect at midweek for most of northern and central Illinois, while northern Ohio experienced rain, scattered snow flurries, and 40-degree temperatures as the week progressed.

Sources continued to talk of excellent yields as the corn harvest reached the midway point and the soybean harvest started to wind down. USDA assigned good or excellent ratings last week to fully 71-82 percent of Ohio’s corn and soybeans, compared with 68-73 percent in Indiana, and 62-68 percent in Illinois.

As of Oct. 20, however, just 31 percent of the Ohio corn crop was in the bin, compared with 43 percent in Indiana and 51 percent in Illinois. The soybean crop was 64-71 percent complete in the region by that date. Growers were also planting winter wheat in the region, with progress rated at 64 percent complete in Indiana, 68 percent in Illinois, and 80 percent in Ohio.

Sources reported minimal changes to the spot fertilizer markets. The anhydrous ammonia market remained at $550-$560/st FOB in Illinois and $560-$570/st FOB in Indiana.

Western Cornbelt: A dusting of snow was reported in parts of central and northern Iowa on Oct. 22, marking the earliest snowfall in 118 years for some location. Other parts of the state reported rains early in the week, which slowed the harvest.

As of Oct. 20, approximately 32-35 percent of the corn crop in Iowa and Nebraska was in the bin, compared with 63 percent in Missouri. The soybean harvest varied widely, with only 36 percent of the crop harvested in Missouri, well behind the 70-80 percent progress reported in Iowa and Nebraska. USDA assigned good or excellent ratings to 68-89 percent of Nebraska’s corn and soybeans last week, compared with 37-45 percent in Iowa and Missouri.

Frequent showers have eased drought conditions in parts of the Western Cornbelt, but the moisture has also delayed both harvest activity and fall fertilizer applications. “It’ll be a compressed fall application season, no doubt,” said one source. “We’re just a rain or two away from being done for the year, and there’s still too much to do. Toward the end of October, one or two rains is all it takes.”

The anhydrous ammonia market remained at $510-$525/st FOB in Nebraska, $525-$540/st FOB in Iowa, and $550/st FOB Palmyra, Mo.

California: The anhydrous ammonia market remained at $630-$635/st DEL in California. Aqua ammonia was steady as well at $172/st FOB in the state.

The harvest continued under nearly ideal weather conditions in California last week, but fertilizer activity was limited. “The mood of retailers

Urea

Bangladesh, Black Sea, California, China, Eastern Cornbelt, India, Indonesia, Market Watch, Middle East, Pacific N.W., Pakistan, U.S. Gulf, Urea, Western Canada, Western Cornbelt

U.S. Gulf: Fresh trades of prompt granular urea were put at $279-$285/st FOB last week. While some prices were put as low as $270-$274/st FOB, those were generally reported as lower-quality Chinese product.

Prills continued to be called $300-$310/st FOB. The U.S. quota of Libyan prills appears to be making it to the country despite utility outages in Libya, which have impacted production. Yara estimates that the Lifeco plant had an operation rate of 50 percent during the third quarter, and this may continue for the short term as utility interruptions continue.

Eastern Cornbelt: Granular urea was steady at $320-$345/st FOB in the region, with the low FOB Cincinnati, Ohio, and the upper end out of inland warehouses in the Ohio market.

Western Cornbelt: Most sources quoted the granular urea market at $325-$335/st FOB in the Western Cornbelt last week, while the low end of the range remained at $320/st FOB in the St. Louis market. The Tulsa, Okla., urea market remained in tight supply at $330/st FOB.

California: Granular urea pricing remained flat at $390-$400/st FOB in California.

Pacific Northwest: The granular urea market continued to be quoted at $400-$405/st rail-DEL in the Pacific Northwest.

Some sources reported higher numbers for truck-delivered tons due to tight supplies and outages at the Rivergate terminal, but others downplayed those reports, noting that a new vessel was expected to replenish Rivergate inventories on Oct. 25. “The price hasn’t moved up by any means,” said one contact.

Western Canada: Although dealer postings remained in the $505-$530/mt DEL range in Western Canada, sources quoted the urea market as low as $450/mt rail-DEL last week in some locations, with the upper end of the range pegged at the $480/mt DEL level in the region.

India: The State Trading Corporation of India (STC) has reportedly sent out letters of intent to the three companies with the lowest offers in its recent tender. Actual awards are not expected to be issued until Oct. 25.

The lowest offered price of $309.90/mt CFR marked an increase in the price India has to pay for its urea. Sources say the upward move of about $15/mt came about because of a confluence of multiple buyers in the market at one time, and also the upcoming closing of the Chinese export window.

Sources said buyers had moved on Chinese material leading up to the tender, leaving some Chinese warehouses with fewer tons than expected. At the same time, Pakistan announced it would need 500,000 mt by the end of the year, and Bangladesh also stepped in with a series of tenders.

The price of $309.90/mt CFR is expected for East Coast ports, while $312/mt CFR is being pegged as a West Coast price.

STC has yet to move to confirm this two-pricing decision. Sources say, however, that if STC wants to get more than 500,000 mt, it may have to accept material in the $312/mt CFR range.

Three companies – Dragon Fertilizers, Dreymoor, and FertTrade – were disqualified from the tender. The combined offers from the three companies totaled 220,000 mt, but STC did not reveal the offering prices. Sources say the disqualification came as a result of disputes between the trading houses and STC over validity and shipping dates. Trammo, meanwhile, sent its regrets.

Results are as follows.

October 18 STC Urea Tender Results
Bidder

Nitrogen Solutions

California, Eastern Cornbelt, Market Watch, Pacific N.W., U.S. Gulf, UAN, Western Canada, Western Cornbelt

U.S. Gulf: The market continued to be called $225-$230/st ($7.03-$7.19/unit) FOB, with no activity.

Sources continued to be divided over price direction. There were three areas of thought last week, with some reporting no change, others saying buyers were seeking lower prices in the $215-$223/st range, and a third group quoting higher prices of $230/st FOB plus.

In the meantime, vessel imports into the East Coast were being quoted in the high $240s to low $250s/mt CFR.

The AUM plant in Trinidad was still down for a turnaround, and is slated to be back up by or around Nov. 1.

Eastern Cornbelt: Illinois sources continued to report UAN-32 pricing in the $280-$288/st ($8.75-$9.00/unit) FOB range, while the UAN-28 market remained at $245-$260/st ($8.75-$9.29/unit) FOB in Ohio and Indiana, depending on location.

Western Cornbelt: The UAN-32 range in late October had reportedly narrowed to $275-$295/st ($8.59-$9.22/unit) FOB most regional terminals in the Western Cornbelt.

California: Sources pegged the UAN-32 market in California at $318-$328/st ($9.94-$10.25/unit) FOB Stockton on the low end, down some $7/st from last report. The upper end of the range remained at $345/st ($10.78/unit) FOB El Centro and Port Hueneme.

Central Valley sources continued to quote rail-delivered UAN-32 at the $320/st ($10.00/unit) level for October.

Pacific Northwest: UAN-32 was quoted in a broad range at $310-$340/st ($9.69-$10.63/unit) DEL in the Pacific Northwest, depending on location, with the low reported in eastern Washington and the upper end reflecting dealer postings.

Western Canada: UAN-28 pricing was steady at $339-$342/mt ($12.11-$12.21/unit) DEL in Manitoba, $342-$345/mt ($12.21-$12.32/unit) DEL in Saskatchewan, and $345-$354/mt ($12.32-$12.64/unit) DEL in Alberta.

Ammonium Nitrate

Ammonium Nitrate, California, Market Watch, Pacific N.W., U.S. Gulf, Western Cornbelt

U.S. Gulf: The last done business continued to be called $270-$275/st FOB. While some said barge supplies have been depleted, they noted that the same was true of demand.

Western Cornbelt: The ammonium nitrate market was quoted at $350-$360/st FOB in the Western Cornbelt.

California: No market was reported for ammonium nitrate in California.

The CAN-17 market had reportedly slipped to $308-$318/st FOB Helm, Calif., while the upper end remained steady at $328/st FOB in desert locations.

AN-20 was unchanged at $300/st DEL and $290-$295/st FOB in the state.

Pacific Northwest: CAN-17 remained at $338/st FOB Kennewick, Wash. No market was reported for ammonium nitrate in the region.

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