Agrium Inc. said Aug. 31 that the Kenai Blue Sky Coal Gasification Project is proceeding to complete a detailed feasibility review. The project’s goal is to develop a world-class, low-emission coal gasification facility that would create a long-term off-take opportunity for Agrium’s Kenai, Alaska, nitrogen complex. It would also generate competitively priced electricity for the regional power grid, as well as excess carbon dioxide that could be used to enhance oil recovery.
Agrium says a preliminary review of the Blue Sky has been completed, and that the detailed feasibility review will include further development of industry partnerships, more detailed definition of the design, and commencement of environmental permitting. Agrium has been awarded a $2 million grant from the Denali Commission and a $5 million grant from the State of Alaska for this phase of the project. The Denali Commission is a federal and state partnership designed to provide critical utilities and infrastructure throughout Alaska, particularly to distressed communities.
“We appreciated the ongoing support of the Denali Commission and the State of Alaska as we commence this next phase of the Kenai Blue Sky Project,” said Agrium President and CEO Mike Wilson.
Agrium says one objective is to develop interest from a group of industry partners to site the coal gas facility. The facility could be operational by 2011 and is based on proven technology.
Agrium has also noted increasing gas exploration in Alaska as a means to keep the Kenai nitrogen plant going until the coal gas option is online (GM Aug. 28, p. 1). As reported last week, Agrium has obtained enough gas to keep its Kenai facility in partial operation in 2007, minus some expected downtime in the winter months.
Agrium announced July 19 the pursuit of a gasification project to serve its Redwater, Alberta, nitrogen plants (GM July 24, p. 1).
Low water levels on the Lower Mississippi River south of St. Louis, Mo., the result of significant drought in areas of the Mississippi River Basin, have forced authorities to implement barge restrictions that are affecting the transportation of fertilizer, grain, and other commodities.
Sources last week said the Lower Mississippi is running about 8-10 feet below normal in most areas. If no rain falls in the lower basin over the next 28 days, authorities said the river could drop another 2-3 feet in many areas. August, September, and October are traditionally the driest months; even if rain comes to some drought-stricken areas of the Delta, sources said the moisture could be soaked up quickly before it makes its way to tributaries feeding the river.
The Lower Mississippi River Committee, an industry group that regulates traffic in times of high and low water, has limited draft depths to 9-9.5 feet along most sections of the river south of the lock and dam system, with some ports enforcing draft restrictions of 8 feet. According to several fertilizer industry sources, the result has been delays in shipments and growing concerns about warehousing issues, because barges are unable to get up to the docks for unloading.
Under normal circumstances, a 35-by-200 foot barge can carry 1,500 tons at a draft depth of 12 feet. Under the draft restrictions currently in place, however, barge loads must be reduced to about 900 tons. In addition, the committee has also decreased the width of tows due to the narrowing of the river’s main channel as water levels recede, resulting in roughly eight fewer barges per float.
The low flows have already produced several vessel accidents that further complicated barge traffic on the river. A traffic freeze was implemented on Aug. 24 at three sections on the river in Mississippi, Arkansas, and Louisiana. The final section was reopened late on Aug. 25, when salvage workers cleared the channel after a float consisting of 32 barges ran aground north of Rosedale, Miss.
The low flows were produced by near record drought in some areas of the Delta. One source last week said the period from March to July was the second driest on record in Mississippi, with some areas seeing rainfall deficits of as much as 10 inches from normal since the first of the year.
According to local news reports, the river dropped to a reading of 1.7 feet on the Vicksburg, Miss., gauge last week for several days, compared with a normal reading of 9.5 feet for this time of year. The record low at the Vicksburg gauge for this time of year is 2.5 feet below the zero mark.
About 70 percent of the water that flows into the lower Mississippi comes from the Ohio River Valley, which gathers water from eight states. While portions of that region have seen ample and timely summer showers, the U.S. Drought Monitor continued to report significant drought conditions along the Missouri, Arkansas, and Tennessee rivers, which are the Mississippi’s other major tributaries.
The long-range precipitation forecast for the Ohio River Valley reportedly calls for a 30-40 percent drop from normal levels, according to weather reports last week.
Water levels on the Mississippi above St. Louis, which are controlled by a lock and dam system, are reportedly normal for this time of year, although lock repair on the Ohio River is another factor impacting barge traffic.
As reported earlier by Green Markets (GM July 24, p. 9), repairs at Lock 52 on the Ohio River at Metropolis, Ill., have produced delays of up to three days since Aug. 3. The planned closure of the big chamber at Lock 52 from Sept. 19 to Nov. 11 promises significantly longer delays, sources said. The U.S. Army Corps of Engineers will also close two locks on the Arkansas River for two weeks beginning Sept. 9.
Growmark Inc. of Bloomington, Ill., recently signed a letter of intent to buy the assets of Huisinga Grain Inc. of Casey, Ill., and Willow Hill Grain Inc. of Willow Hill, Ill.
Huisinga, family-owned since 1955, serves the counties of Cumberland, Coles, Clark, Edgar, Jasper, and Crawford from one facility in Casey.
Willow Hill, family-owned since 1968, operates six facilities serving the counties of Jasper, Crawford, Clay, and Effingham.
The decision to purchase the assets came from a study of present and future grain dynamics across the state of Illinois. Growmark said the acquisition of these two well-respected operations will better position Growmark to provide the services Illinois grain producers require.
Growmark is planning to partner with two of its member cooperatives, Effingham-Clay Service Co., Effingham, Ill., and Wabash Valley Service Co., Grayville, Ill., in running the assets. The new partnership will be called Total Grain Marketing LLC (TGM) and is expected to be finalized in September.
Wabash Valley will integrate the Willow Hill plant food and crop production services into existing operations. “Our partnership with Effingham-Clay Service Co. and Growmark will strengthen our long-standing commitment to provide the best crop production products and recommendations in our territory,” says Wabash Valley Service Co. General Manager Todd Neibel. Wabash Valley provides farm supply products and related crop production services in the Illinois counties of Crawford, Edwards, Gallatin, Hamilton, Jasper, Lawrence, Richland, Wabash, Wayne, and White.
Effingham-Clay will integrate its current grain operations into those of TGM. “Our partnership with Wabash Valley Service Co. and Growmark will provide additional grain storage options, more end-user markets, and will strengthen the package of grain services we provide our producers,” said Effingham-Clay General Manager Randy Handel. Effingham-Clay serves the Illinois counties of Clay, Coles, Cumberland, Effingham, Marion, Moultrie, and Shelby, and provides grain marketing services, farm supply products, and related crop production services.
Oslo-Yara International ASA said Sept. 1 that it has agreed to establish a strategic partnership with China BlueChemical Ltd. to pursue growth opportunities in China. Yara said it will purchase up to a 3.2 percent ownership stake in the company in connection with its proposed initial public offering and listing on the Hong Kong Stock Exchange. “The partnership is a win-win for Yara and China BlueChemical that will harness each company’s experience and capabilities in nitrogen applications for the development of the Chinese markets,” said Yara President and CEO Thorleif Enger. “The partnership will create new opportunities for both parties, enable joint investments in competitive nitrate and/or NPK plants, and consequently expand the production, marketing and distribution of mineral fertilizers in the fast growing, high-margin domestic cash crop segment, and establish a platform for new projects in industrial applications.” China BlueChemical, a subsidiary of China National Offshore Oil Corp., focuses on the production of ammonia, urea, and methanol. It is one of the largest and most efficient producers of nitrogen fertilizers in China, with manufacturing plants that are conveniently located to serve both domestic and export markets and that benefit from proximity to energy sources and secure and stable feedstock supplies. It operates three modern production facilities, two of which are located on gas-rich Hainan Island, and one of which is located in Inner Mongolia. The Hainan Fudao plants incorporate Yara granulation technology. The plants were built between 1996 and 2003 and have a total designed annual urea production capacity of 1.8 million mt. China BlueChemical’s domestic sales network extends across 20 provinces and municipalities under the direct supervision of the central government of China. China is the world’s largest fertilizer market and accounts for a third of global urea consumption (45 million mt), growing at 8 percent per annum.
Oslo-Yara International ASA said Aug. 31 that it has decided to make a public offer to acquire all non-voting shares in Fertibrás S.A. The decision was taken following a proposal from minority shareholders holding more than 70 percent of the free-floating shares. Yara said its acceptance of this offer triggers a mandatory de-listing public offer. Yara offers a purchase price of BRL 34.5-35 per non-voting share depending on date of payment for the shares, provided the offer can be concluded within a 190-day period counting from this date. The total acquisition price for Fertibras, assuming 100 percent acceptance, including the current offer, amounts to about US $211 million, giving a P/E of approximately 9 based on average 2004 and 2005 earnings. Yara currently owns all voting shares in Fertibrás, and about 48 percent of the total shares.
Lakeland, Fla.-Harrell’s has reported that the ambitious modernization at its main manufacturing facility here, including an automated loading system, a new hot-melt process, and updated bagging equipment, has been completed and is in operation. While company officials aren’t talking about costs, Green Markets was told that much of the investment involved repairs from the 2004 hurricane. “We haven’t announced that figure publicly,” spokeswoman Tami Grimes said. “Our primary emphasis was improving quality over quantity. Now we have better logistics getting our products from warehouse to customer.” Grimes said the project was started almost two years ago. The new overhead unloading system for the line product for golf course greens is fully automated, from delivery vessels to holding bins, and is said to improve quality by allowing for raw materials to be moved through the plant above equipment and other materials. The hot-melt process was added to the existing system used to produce impregnated products. “It’s a completely separate line from the regular fertilizer line to ensure that our other fertilizer blends remain chemical free,” Grimes noted. The renovated bagging process includes both new bagging and sealing equipment, which replaces the previous .4 millimeter with .5 millimeter bags and introduces a new look for better product content identification. Harrell’s has also added 1,500 square feet of dock space, which almost doubles the area, as well as new offices for plant administration.
Washington, D.C.-The severe drought ranging from Texas up to South Dakota and other areas of the Midwest prompted the federal government to promise nearly $800 million in disaster aid on Aug. 29. USDA Secretary Mike Johanns said 64 percent of the nation’s beef cows and breeding stock are in drought-stricken areas, and that many ranchers are being forced to cull their herds. Drought is also stressing fields of cotton, wheat, sorghum, peanuts, and other crops, Johanns said. Of the drought relief total, $50 million will come in the form of block grants for livestock producers in counties designated as “extreme” or “exceptional” drought areas; $18 million in emergency conservation funds to rehabilitate farmland in 27 states; $11 million from the grassland conservation program for grazing lands in 14 states; and $700 million worth of accelerated planned payments to cotton, grain sorghum, and peanut farmers. The aid is on top of $4 billion in crop insurance the government expects to pay out this year. The aid announcement, which came less than a month after Texas agriculture officials said this year’s crop and livestock losses would total $4.1 billion and represent the worst single-year losses in the state’s history, was greeted with criticism from some farm groups and farm state legislators, who said it was not nearly enough.
U.S. Gulf/Tampa: While higher numbers were being reported in the international markets, no changes were recorded last week for Tampa or NOLA. Major players were reportedly in negotiations over first half September Tampa business, with sellers expecting prices would be up, at least in line with recent sales into Savannah and Donaldsonville around the $285/mt DEL mark.
There was one report that a spot cargo was sold to Mosaic for end of September delivery at around $285/mt DEL.
Eastern Cornbelt: Anhydrous ammonia was pegged at $350-$365/st FOB regional terminals, with the upper end reflecting reference levels from some suppliers. The low was reported out of Illinois River terminals last week.
Western Cornbelt: Anhydrous ammonia was quoted at $340-$360/st FOB regional terminals. One Missouri source tagged the dealer price at the $345/st FOB mark or stronger, but wasn’t sure if the market had more of an upside as natural gas slipped and drought stalled preplant movement on winter wheat in some areas of the region.
Southern Plains: Anhydrous ammonia pricing was up slightly at $315-$335/st FOB in the region, with the low out of regional production points and the high at pipeline terminals in Kansas. Delivered ammonia was pegged at $330-$340/st in the region, depending on location.
Effective Aug. 17, Agrium’s ammonia postings moved up again to $350/st FOB Clay Center, Kan.; $345/st FOB Conway, Kan.; $340/st FOB Mocane, Okla.; and $315/st FOB Borger, Texas. Delivered ammonia postings from the Borger location included $335-$340/st in Texas, with the low north of Interstate 40 and the high south.
Agrium’s fuel surcharge rates, effective Aug. 22, included 22.5 percent in Texas and New Mexico, and 23.5 percent in Kansas and Oklahoma. The company’s Aug. 15 rates included 26.5 percent in Colorado.
South Central: Anhydrous ammonia was quoted at $345-$355/st FOB regional terminals, with the low end also quoted for rail-delivered tons in Kentucky.
Middle East: What was a sleepy market awoke with a roar last week. Ammonia prices shot up on a deal between Qafco and Pardeep/India that reflected an increase of $35-$40/mt. Sources say the new price is now pegged at $245-$255/mt FOB, with a real possibility of more growth.
In the past few weeks the market was spread between $190/mt FOB and $225/mt FOB, with the destination determining the final netback. Sources said the traditional two-tier market the Middle East producers usually have – one price for Asia and another for the States – was split even more as each destination became a unique market. The result in differing freight rates as well as differing market strategies led to the spread.
Even with that spread, many in the market looked to a tighter range that looked similar to Olympic judging: the high and the low were eliminated in favor of a middle range. Now with the jump in price confirmed, sources are pretty well settled on a tighter spread.
Sources say the increase was in the works for a while. The price of Middle East ammonia had been running too close to the Yuzhnyy price to make market analysts happy – they had been looking for the two markets to once again regain their $10-$15/mt spread. The two markets have recently been running close to parity despite the differences in freight prices to competing markets. One observer noted the ammonia market has been “weird” most of this year, and with this price increase may return to normalcy.
The deal that moved things so fast was said to have been done through Yara. Little else in the market could explain the increase other than everyone suddenly seeing an increase and acting on that vision.
Only the Safco III facility is down for one month. All other area production is said to be online and in full operation. In addition, there is only a September shutdown for KPA in Indonesia that might indicate a drop in output in the Asian market. Not enough, say sources, to push the price as high as was seen last week.
Black Sea: With demand in the States reportedly ready to pick up along with increased European demand and the jump in price in the Middle East, sources say Yuzhnyy is ready for a rebound. The price has already rebounded $7-$9/mt. Sources now peg the market at $217-$219/mt FOB with plenty of room to grow.
Asia: Buyers reacted with shock when Yara concluded a deal with Qafco/Qatar that took the price up $30-$40/mt FOB. One Japanese trader noted the ammonia market had just experienced an earthquake and that Japan is now waiting for the shockwaves to hit. Prices are expected to skyrocket as regional suppliers look to take advantage of the Middle East price increase.
Even buying from South Korea for Japan has been hit. Reportedly, one trader offered tons from South Korea at prices that would equate to the latest Middle East price. For Japanese buyers that pricing level was too much too soon, and the offers were rebuffed. However, said one source, in a few weeks that price might look attractive.
What few cheaper tons were available were snapped up by early last week. The only tons now available reflect the new Middle East price, much to the dismay of buyers.
Indonesian joint venture KPA is going down this week for routine maintenance. It is expected to be out of operation for three weeks.
Production at Kaltim and KPI in Indonesia remains strong.
In anticipation of the KPA shutdown, sources say buyers and traders have been building up reserves.
The next real test of pricing in Asia will come with the upcoming CPDC/Taiwan purchase. In the past CPDC has been somewhat forthcoming with its purchases, even at times when the price was going up, but lately they have been holding their cards close to their collective vest.
UREA
U.S. Gulf: Price ideas were all over the board last week, with most weighing in on a stable-to-firmer market. These folks put prices in the $225-$232/st FOB range, with players claiming that new NOLA business was done at each end of the range, and the higher numbers reported later in the week. These sources pointed to poor river conditions as a good reason for the higher numbers (See story page 1).
Still others believed business could still be done in the low $220s/st FOB, claiming that a few sales in that range were achieved during the prior week.
Better moisture in the Southern Plains was something for sources to talk about, but they said players are waiting to see actual farmer demand before moving urea into position. However, that said, farm economics in the region should be good enough to prompt demand due to good wheat and cattle prices and a hay shortage.
Agriliance was reported to be loading a vessel in Kuwait, a signal that it has concluded a new deal with PIC for the coming year.
Eastern Cornbelt: Granular urea remained at $250-$260/st FOB in the region, with reference pricing as high as $270-$280/st FOB. One source said he expects a late winter fill on urea this year, with dealers seeing little reason to commit early.
Western Cornbelt: Granular urea was generally quoted at $250-$258/st FOB river locations, with postings as high as $285/st FOB. Dealer pricing on the Missouri River was reported at the $255/st FOB mark or higher last week.
Southern Plains: Granular urea remained at $250-$255/st FOB Inola and Enid, Okla., with most dealer quotes reported at the low end of that range. Late August rains in much of the region renewed interest in fall fertilizers, including preplant movement on winter wheat. Sources reported some activity underway in the region last week, although other areas remained wet after the weekend showers. Several sources said fall prospects are good due to the improved soil conditions and wheat prices.
South Central: Granular urea pricing was up slightly from last report. The market was quoted at $255-$260/st FOB regional terminals, with the high reflecting the dealer list price at Vicksburg, Miss. Prilled urea was pegged at the $247/st FOB mark in Arkansas.
Southeast: Granular urea was pegged at $260/st FOB Wilmington, N.C., Brunswick, Ga., and Savannah, Ga., with dealer pricing reportedly as high as $270/st FOB Norfolk, Va., in late August.
Black Sea: It’s now one quiet week after another. Sources report that the only business done in the Black Sea involved a few small cargoes picked up by traders. One observer in Asia noted the purchases appeared to be attempts to provide props to an apparent falling market.
The deals reported were around the $215/mt FOB range for small tons for Yuzhnyy – 10-20,000 mt. So far, no one is sure where those tons will go.
Producers apparently are asking much more, but no one is taking any number above $217/mt FOB very seriously. Some even add the days of $217/mt FOB material are long gone.
For now, the betting is the market will hold even at best, but will most likely fall off.
No major buying is expected until early October, and by then about 500,000 mt of Chinese urea will be on the market, ensuring no Asian buyer will be interested in anything from this region. At the same time, hopes that Pakistan will take 300-500,000 mt have been dashed as the government now reports it only has a shortfall of 100,000 mt for the rest of the year.
India will take tons between now and January, but only at the right price, say sources. As a result, buyers from that country are only willing to continue talking to people if their price is right. At current levels in the Black Sea, the price is not yet right.
Adding to the idea that prices are set for a drop are reports that some of the major trading houses are long. With no homes for their current tons and with no big buyers on the horizon, sources say there is little to argue for higher prices.
So for now, the best bet for pricing is $215-$217/mt FOB, but for real business nothing over $215/mt FOB is expected, and buyers are looking to push below $214/mt FOB sooner rather than later.
Middle East: Producers are comfortable and are pushing for higher prices. In fact, they are now saying their offers of $230/mt FOB for prills are the starting point for talks. One trader noted that if they hold to that position, they will not be talking to anyone.
Even though Indian buyer IPL is nosing around for tons and TCP/Pakistan has made it clear it will be buying, neither of these players is willing to pay much more than the last done business out of the region, which is closer to $218/mt FOB.
And adding to the pressure on both sides of the bargaining table are increases in freight rates. Vessels that were booked at $15/mt just a couple of weeks ago were being quoted at $20/mt and up last week. With IPL holding firm on its desire not to exceed $230/mt CFR – although that resolve is weakening somewhat – that puts lots of pressure on the producers to lower their netback. Reportedly, IPL is now willing to discuss $240/mt CFR, but that still means a netback for prills at $220/mt FOB before any other costs to the trader are deducted.
The reason for the increase in freight is not just the rising fuel costs. Sources say the demand for ships hauling grain and other commodities is growing and squeezing the fertilizer orders.
At the same time, there appears to be no urgency from Pakistan or India for material already booked to be shipped. Sources say the PIC material sold through Toepfer to IPL is not slated for loading anytime soon, even though it was booked as an August cargo. One observer said the Toepfer situation is not unique. Others with booked business are under no pressure to deliver as originally booked. In fact, one source said, IPL appears to be hoping many of the orders don’t come too soon.
This kind of lack of desire by the end user and no other new markets coming up is putting pressure on the market. While granular producers have been steadily feeling the pinch of a glutted global market, prilled makers are now also starting to see strong resistance to price increases.
Still, all is not lost. The IPL willingness to take prilled tons at $240/mt CFR means they are willing to look at the $217-$219/mt FOB range. That is helpful to producers who want higher prices, but it is not enough of an increase, they say.
And plenty of granular is available, thus giving producers little hope for a price uptick.
Sources now peg the Middle East granular at a steady $215-$220/mt FOB, because business to nail down a new price has been nonexistent. Prills are holding at just about the same level, but with the likelihood any new business could come in at the upper end of the register. Preventing a runaway prill market, say sources, is the growing willingness of some major buyers from the region to accept granular in sufficient quantities to restrain the market.
India: Reportedly, IPL is sniffing around, but making it clear it does not want to pay more than $240/mt CFR. And that is a concession to higher prices, not producers’ expectations of higher netbacks.
Sources say the freight rates from the Middle East to India have jumped from $15/mt in early August to just more than $20/mt last week.
IPL will buy, say sources, but any purchases before an expected tender later this month will only depend on the producer agreeing to the $240/mt CFR price.
Reportedly, the company is able to be a price buyer at this time. Even though the conventional wisdom is that India will need about 800,000 mt between now and January 2007, sources say the current stockpiles are sufficient to wait out the producers. Once Oct. 1 rolls around, say sources, a number of markets will be taking Chinese product instead of tons from the Black Sea or Middle East. Add to that the willingness of IPL to now take a portion of the deals in granular material instead of only prills, and there is nothing but downward pressure being applied on prices.
Pakistan: Apparently the surplus keeps growing. Earlier estimates of fourth quarter buying needs have dropped from 500,000 mt to 300,000 mt to the current 100,000 mt. There is a good chance TCP will call a tender later this month for the 100,000 mt with shipments for late October and early November. The number may be higher if the government thinks it will ease the worries of farmers, something always important in an agricultural country as elections near. Once TCP awards the tender, sources say that will be it for the year. No more tons will be required until spring 2007.
China: Apparently ConAgra and Transammonia have already booked October tons out of China. Sources say these purchases will most likely be used to back plays in the BCIC/Bangladesh tenders. Sources say that some of the ConAgra tons could find their way to the U.S. West Coast, the U.S. Gulf, Mexico, or South America.
Other inquiries for Chinese tons have come from the United States. Reportedly, queries for vessels from Chinese ports to the West Coast of the States are being made.
And as we enter September, sources report urea factories are beginning to ship their material to ports for export. One source noted a certain amount by the end of the year must be reserved for domestic demand, but right now there is no domestic market. So producers are sending their tons for export.
For some producers, exporting will mean losing a small amount on each ton. Still, said one observer, it is better to lose a small amount now than to lose a lot later. If the urea is not exported this quarter, he said, the built up reserves will be enough to crash the domestic market. Good for the farmers. Bad for the producers.
If the export tax is halved next month; sources expect to see about 500,000 mt hit the market. One observer likened the situation to the beginning of the Indianapolis 500, with vessels straining to begin loading at 12:01 a.m. Oct. 1 and to rush out of port with their cargoes.
A large buyer of Chinese urea is BCIC/Bangladesh, which has already booked 100,000 mt from one tender, will apparently issue another award for a second 100,000 mt from another tender, and will call one more tender this week. All the material for these tenders is expected to come from China.
Bangladesh: Still no word on the August tender. So far BCIC has been granted only enough money to import the 100,000 mt awarded in the July tender. The company still plans to go ahead with its Sept. 5 tender for 100,000 mt each of prilled and granular urea.
NITROGEN SOLUTIONS
U.S. Gulf: Most continue to put the range within the $155-$162/st FOB span. However, more last week were indicating price ideas of $160-$162/st FOB. That said, some of them felt UAN prices may have about topped out at that level, at least for now.
Eastern Cornbelt: UAN-28 was quoted in a broad range at $161-$175/st ($5.75-$6.25/unit) FOB regional terminals, with the low reported for limited tons out of river terminals in Illinois and the high to dealers FOB E. Liverpool, Ohio. The dealer market at Cincinnati, Ohio, was pegged at the $166/st ($5.93/unit) FOB mark. Postings were reported as high as $180-$183/st ($6.43-$6.54/unit) FOB in the region, but no sales were reported at those numbers.
Western Cornbelt: UAN remained at $5.90-$6.26/unit FOB regional terminals, with the upper end reported in Missouri.
Southern Plains: UAN-28 was pegged at $145-$155/st ($5.18-$5.54/unit) FOB regional terminals, with reference pricing out of some Kansas locations as high as $5.78/unit FOB.
South Central: UAN-32 was quoted at $180-$185/st ($5.63-$5.78/unit) FOB regional terminals, with dealer postings as high as the $190/st ($5.94/unit) FOB mark.
Southeast: UAN-30 remained at $175-$180/st ($5.83-$6.00/unit) FOB Wilmington and Norfolk. Sources quoted the UAN vessel market at $187-$190/mt C&F.
AMMONIUM NITRATE
U.S. Gulf: Most put the barges in the $195-$198/st FOB range, though there was speculation that lower quality product could be had below $190/st FOB.
Western Cornbelt: Ammonium nitrate remained at $245-$255/st FOB in the region.
Southern Plains: Ammonium nitrate was tagged at $245/st FOB the port of Catoosa, Okla.
South Central: Ammonium nitrate was $235-$245/st FOB in the region.
Southeast: Ammonium nitrate was $280/st rail-DEL in the Carolinas for imported tons. Sources said ConAgra was rumored to be bringing a nitrate vessel into the Wilmington market.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate was pegged at $153-$157/st FOB in the region.
Western Cornbelt: Ammonium sulfate was tagged at $155-$160/st FOB.
Southern Plains: Granular ammonium sulfate remained at $150/st FOB Freeport, Texas, and $180/st FOB Plainview, Texas.
South Central: Granular ammonium sulfate was steady at $170-$175/st FOB regional warehouses.
Southeast: Granular ammonium sulfate remained at $142/st FOB Hopewell, Va., and $147/st FOB Augusta, Ga., although shipments were reportedly scheduled through Sept. 15 for orders placed at earlier postings of $137/st FOB Hopewell. Delivered granular sulfate was $162-$180/st in the region for new sales, depending on location.
PHOSPHATE
Central Florida: Early last week, as Ernesto neared hurricane strength south of Haiti, phosphate producers dusted off their hurricane preparedness and emergency plans. The storm then crashed into the 9,000-foot mountains on western Haiti, and the winds diminished as it headed for Cuba. In Cuba, it hit more high ground and weakened again. Weather forecasters expected the storm to gain strength as it moved across the warm waters of the Florida Straights, but it did not. Instead, it lost enough steam to lose its tropical storm status and became a tropical depression, with sustained winds of only about 30 miles per hour as it sloughed across the Florida Peninsula. As a result, all that careful preparation was unnecessary, at least for Florida phosphate producers.
By Thursday morning, when Ernesto left Florida, it had gained strength to again become a tropical storm with winds up to 60 miles per hour as it cruised along the Gulf Stream for an eventual hit in the Carolinas. The forecast called for sustained winds of up to 70 miles per hour when it made landfall, but could achieve minimum hurricane strength of 74 miles per hour or higher by that time. That could affect operations at PotashCorp’s Aurora Mine in North Carolina, but that was still to be determined. Even if it did not become a hurricane, it would be the worst storm to hit the U.S. this year, which is a good thing.
Rumors continued to claim that DAP could be purchased for about $222/st FOB, but no confirmed sales have been made at that level. Sales were essentially unchanged last week, but producers said there was an uptick in interest from buyers, most of whom were only kicking tires.
The Central Florida DAP range was unchanged at $223-$226/st FOB last week. Mosaic’s posted price was $228/st FOB but was selling as low as $226/st FOB, and CF’s posted price was said to be $227/st FOB with sales at $223/st FOB. Prices do not include discounts; however, some large buyers can obtain a lower price without a discount from some producers. CF was said to be selling DAP as low as $223/st FOB. Mosaic discounts MAP $4/st from the price of DAP, while CF has no price difference. PotashCorp’s Central Florida reference price was still at $245/st FOB. In Texas, Agrifos’ prices were unchanged at $255/st FOB for DAP and $261/st FOB for MAP, but sales improved slightly compared to the previous week.
U.S. Gulf: Sufficient rain hit the North Texas, Oklahoma, and Kansas areas during the last two weeks to not only give life to crops and other vegetation, but to the fertilizer industry in the region as well. Along the Arkansas River, terminals were quickly emptying their bins of phosphates, potash, and urea, and reordering was underway. However, the U.S. Army Corps of Engineers will close Lock No. 8 near Little Rock on the Arkansas on Sept. 4, continuing through Sept. 14 for maintenance, and barges caught on the wrong side will have to wait. For traders whose barges get caught in the position, it will mean paying high demurrage rates, which will cut into netbacks. For those with enough product to wait out the closing it will mean a boon, which was already underway anyhow. The wheat crop normally goes in the ground on Sept. 15, and that will mean increased sales. That area was the bright spot for the phosphate industry during the past two weeks, and that should continue.
Dealers have been keeping low inventories in their bins, and only reordering the amounts they sell to avoid getting caught holding the bag at the end of the season. Most were using terminals for resupply, but the fall season is just about to kick into high gear, and the supplies dealers and traders have on hand will not last. Upriver customers will be especially hard hit, because supplies in that area were already low. The river closing should be the normal Oct. 15, and few barges were being fleeted on the river due to the high cost of storage. When the meager supplies upriver run out, they will not be able to restock until a few months after the coming year.
In general, barge activity was virtually nonexistent last week, with the exception of contract barges, which were mostly destined for customer warehouses.
With no sales outside the previous week’s range, the NOLA DAP barge price did not change last week, remaining at $225-$231/st FOB. The cheapest barges were from resellers of Miss Phos phosphate, while Mosaic’s were on the higher side.
Eastern Cornbelt: DAP and MAP remained at $260-$270/st FOB regional warehouses, with the low out of river locations and the upper numbers inland. The dealer market FOB Cincinnati was quoted last week at $260/st for MAP and $263/st for DAP. 10-34-0 remained at $250-$260/st FOB in the region.
Western Cornbelt: DAP and MAP were quoted at $255-$265/st FOB river warehouses in the region, with reference pricing as high as $280/st FOB out of inland locations. Most dealer quotes on the river system were reported at the $260/st FOB mark last week. 10-34-0 remained at $255-$260/st FOB in the region.
Southern Plains: DAP was down slightly from last report, with the dealer market pegged at $257-$260/st FOB Catoosa. MAP was the same price as DAP. 10-34-0 was quoted at $245-$250/st FOB, and $270/st DEL in Oklahoma.
South Central: DAP remained at $255-$260/st FOB most regional warehouses, with MAP pegged at $255-$261/st FOB. TSP was $220-$225/st FOB, with the low at Memphis.
Southeast: Delivered DAP into North Carolina last week was pegged at $266-$270/st, with the low for railed product and the higher number for truck-DEL tons.
U.S. Export: PhosChem made two offshore sales during the past week, which totaled 48,000 mt. One of those was made into Argentina, 28,000 mt of DAP with a CFR price of $293/mt, which would result in a price of $259/mt FOB because of higher freight rates. PhosChem was in the process of attempting to sell additional amounts into Argentina, which could slightly reduce its freight cost by filling the vessel. Another sale of 20,000 mt of DAP was made to an unidentified buyer at $260/mt FOB. PhosChem was still sending six panamax vessels a month to India and another one a month to China, which was helping to keep inventories of the members of PhosChem in healthy condition. PhosChem will also send 40,000 mt to Pakistan within the month.
Last week, Mosaic loaded a vessel in North Africa with 20,000 metric tons of triple, TSP, and 35,000 mt of phosphate rock for delivery to its processing facilities at Donaldsonville. All of the TSP, which will be for barge delivery, had already been sold at $205/st FOB.
The export DAP price range dipped $1/mt last week because of higher freight rates. The new export DAP price range was $259-$263/mt FOB last week, compared to the previous week’s range of $260-$263/mt FOB.
POTASH
Eastern Cornbelt: Potash was commonly quoted at $195-$200/st FOB regional warehouses, with most quotes for red granular product in the $195-$198/st FOB range. Reports of sub-$190s/st sales were reportedly for direct-transferred barge tons.
Western Cornbelt: Potash was $193-$200/st FOB in the region, depending on grade and location. A Missouri source tagged the dealer market last week at $195/st FOB for red granular and $198/st FOB for white granular.
Southern Plains: Potash postings remained at $192-$198/st FOB Carlsbad, N.M., depending on grade. Warehouse pricing was tagged at $198-$205/st FOB in the region, with delivered potash at $210/st on the upper end.
South Central: Potash was steady at $193-$198/st FOB regional warehouses.
Southeast: Dry potash was $210-$220/st DEL in the region, depending on grade and location, with the lower numbers reported for delivered granular potash in the Carolinas.
SULFUR
Tampa: Tropical Storm Ernesto failed to live up to its potential and never made it to the Gulf of Mexico, where it could have created some problems for sulfur vessels. Instead, it diminished to a tropical depression with winds of only about 30 miles per hour as it washed across portions of Florida during the middle of last week. It gained strength when it entered the Atlantic Ocean and found warm waters in the Gulf Stream. By the time it makes landfall again in the Carolinas, it could reach minimal hurricane strength. That could create a problem at PotashCorp’s phosphate processing facility at Aurora, N.C., but would not likely be serious enough to halt production or interrupt sulfur supplies. A sulfur vessel was scheduled to be at Tampa by the end of last week.
Higher fuel surcharges and higher rates were having an impact on sulfur railcar prices, and actual prices for delivered sulfur were either going up or producers were taking a loss on their byproduct. Fuel surcharges for trucks were running 30-35 percent higher than a year ago. In addition, railcar rental rates were up, and sulfur railcars had higher costs for maintenance, like meeting the new requirement for washing the car’s exterior. Canadian sulfur could dry up unless producers there are compensated. Still, that higher delivered cost to sulfur producers was not likely to put a plug in phosphate companies’ expected demand for a lower fourth quarter price, probably between $3 and $5/lt, at least for molten sulfur delivered to Tampa by vessel. The main reason for that is the world market was in the dumpster due to higher ocean freight rates, which were also responsible for a halt to pellet production on the Gulf Coast.
MARKET NOTES
Western U.S.: Agrium’s postings for truck-delivered anhydrous ammonia dropped on Aug. 21 to $395/st in Central California and $400/st in northern California.
Columbus, Ohio: Hexion Specialty Chemicals said Aug. 24 that its Phenolics and Forest Products Division would declare force majeure for formaldehyde and formaldehyde-derived products in North America effective immediately. The announcement follows Hexion being placed on allocation for methanol, a key raw material in the production of formaldehyde and formaldehyde-derived products, as two major methanol producers also recently declared force majeure. As a result of the raw material limitations, Hexion is allocating its available supply of formaldehyde and formaldehyde-derived products in North America among its customers during the force majeure period, dependent on logistics. Hexion is working with all impacted customers to mitigate the effects of this supply interruption on its operations and customer deliveries. However, the duration of the force majeure period and the potential financial impact of this situation on the company are unknown at this time. Hexion said its urea acquisitions have not been impacted by the force majeure.
Haifa, Israel: In response to arguments that its ammonia tank should have shut down during the recent hostilities in Israel and Lebanon, Haifa Chemical says its ammonia storage tank is the best protected in the world. Haifa says the tank has two concentric reinforced concrete walls that surround the tank to its full height, each capable of withstanding any explosion or direct hit by terrorists’ rockets. In addition, the tank is surrounded by a reservoir that can hold all the tank’s content in case of any leak caused by other extreme scenarios, e.g., a very intense earthquake. This potential content is sophistically protected from evaporation. To further reduce any danger, the operators are able to quickly and safely empty the tank.
India: Zuari Industries Ltd (ZIL) has drawn up plans to set up a 1.0 million mt/y urea plant in the Gulbarga district in the South Indian state of Karnataka. ZIL expects to get newly found gas from the KG Basin through cross-country pipelines starting from Kakinada to Ahmedabad. The location was chosen because of proximity to the pipeline, availability of adequate water, and high demand for urea from the area, which is called the rice bowl of Karnataka. Zuari has now sought the intervention of the Department of Fertilizers to solicit a gas supply agreement with either Reliance or GSPCL.
FACT announced its overseas foray by signing its first memorandum of intent with Adi Establishment of Syria for setting up a joint venture ammonia-urea complex in Egypt. Sources in FACT said Syria was also considered for the project, but availability of natural gas at substantially lower prices tilted the scales in favor of Egypt. The proposed Rs. 20bn complex will have an ammonia and urea plant with an annual capacity of 0.7-1.0 million mt/y urea. According to this MOI, natural gas, electricity, water, and other infrastructural facilities will be taken care of by Adi, while the technical and operational aspects will be handled by FACT. FACT will have 50 percent equity participation, though the final ratio will be decided after further talks.
National Fertilizer Ltd (NFL) has informed the Department of Fertilizers of its desire to invest in joint venture possibilities with foreign companies. The company is seeking investment possibilities in Saudi Arabia and is also forming a jv for the development of gas-based fertilizer plants in Iran. NFL claims to be able to invest about Rs 2.5bn in these proposed joint ventures out of their own resources, and can also arrange commercial borrowing as it is a debt-free company. NFL has formed a core group to explore the possibilities of setting up jv plants in India or on foreign soil for the production of urea/phos acid/complexes.
In other news, a delegation from Indian companies is expected to visit Kuwait in November to further discuss possible joint ventures with PIC.
Rashtriya Chemicals and Fertilizers (RCF), is planning to partner with Gas Authority of India (GAIL) to set up a surface coal gasification plant at Talcher in Orissa. The project, which is estimated to cost Rs 25b, also includes an ammonia plant. The latter is expected to have a “substantial” capacity and use all of the gas produced.
Nagarjuna Fertilizers and Chemicals Limited (NFCL) has sought permission to expand the existing production capacity of urea from 1.2 million mt/y to 1.7 million mt/y. NFCL accounts for 7 percent of the country’s total urea production and meets 55 percent of the requirements of Andhra Pradesh.
Pakistan: The country’s second largest urea maker – Engro Chemical – has submitted a Statement of Qualification (SoQ) to the Pakistan Ministry of Industry for the allocation of 100mmcfd gas, which the company plans to use for setting up a new urea plant near the Qadirpur gas field. The government has already announced that the gas would be allocated through competitive bidding. “The management stated that if allocated to Engro, the company intends to establish 1.15 million mt per annum capacity ammonia complex with a cost estimate of US $900-$1,000 million,” said Atif Malik, equity analyst at JS Capital Markets, who attended an Engro briefing. The last date for the submission of the SoQ is Aug. 15, after which pre-qualification would take place by the end of September 2006, with the bidding process expected to be completed in October 2006.
The government has asked the local sponsor of the Fatima Fertiliser plant at Sadiqabad, in Punjab province, to complete the plant by Aug. 31, 2008, or otherwise be prepared for penalties. The company is a joint venture of Fatima Group and Arif Habib Group – setting up a $475 million plant to produce 450,000 mt of urea in addition to other fertilizer. Fauji Fertiliser Bin Qasim Ltd. (FFBL) reports that it has contracted for basic and detailed engineering with Jacobs Engineering to provide for a revamp and expansion of its ammonia, urea and DAP facility at Port Qasim, near Karachi.
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.
