All Posts from January 5, 2009

Market Watch

AMMONIA

U.S. Gulf/Tampa: The NOLA and Tampa markets remained quiet over the holidays, though sources are anxiously awaiting news of January Tampa prices.

El Dorado, Ark.: On Dec. 8, 2008, El Dorado Chemical Co., (EDC) a unit of LSB Industries Inc., received the executed anhydrous ammonia sales agreement, to be effective Jan. 1, 2009, with Koch Nitrogen International Sarl (Koch). Koch will supply EDC 100 percent of the ammonia required by EDC for processing at EDC’s El Dorado, Ark., chemical processing facility. The agreement follows a previous sales agreement, dated March 9, 2005, as amended, between EDC, Koch, and Koch Nitrogen Co., that was to terminate Dec. 31, 2008.

Eastern Cornbelt: In spite of wet weather and flooding concerns in several areas of the region, sources said growers were making some year-end fertilizer purchases. Several said growers were committing money, but leaving actual prices and volumes to be negotiated at a later date. Fertilizer prices at the wholesale level continued to show weakness.

The ammonia market was quoted at $450-$525/st FOB in Illinois, with the low for cash market tons and the upper end reported for confirmed sales of spring prepay tons.

Western Cornbelt: Delivered prepay ammonia to points in Missouri was quoted anywhere from $400-$500/st from southern production points in late December. Out of regional terminals, the ammonia market was pegged at $450-$565/st FOB, with the upper end reflecting cash market pricing FOB Palmyra, Mo.

California: The anhydrous ammonia market remained at $755-$800/st DEL in California based on the most recent postings, but sources said another pricing adjustment is likely in early January. Aqua ammonia was also unchanged at $185/st FOB in late December.

Pacific Northwest: Sources pegged the anhydrous ammonia market at $550-$595/st DEL in the region, down significantly from last report. Agrium’s Dec. 12 anhydrous ammonia postings included $565/st rail-DEL in Washington, Oregon, Idaho, and Utah; $585/st truck-DEL in northern Idaho, and in Washington and Oregon east of the Cascades; and $590/st truck-DEL in Montana and northern Wyoming. Agrium’s aqua ammonia postings moved on that date to $146/st FOB Central Ferry and Finley, Wash.

Western Canada: The anhydrous ammonia market was pegged at $730-$775/mt DEL in Western Canada at year’s end, down significantly from last report.

UREA

U.S. Gulf: The market continued to show strength over the holidays, with most calling newer trades within the $210-$220/st FOB range for granular.

Eastern Cornbelt: The granular urea market was tagged at $280-$295/st FOB in the region for cash or prepay tons.

Western Cornbelt: Granular urea continued to slide, with the dealer market quoted at $260-$290/st FOB regional terminals in late December. There were reports that urea postings out of the Catoosa, Okla., market were at the $270/st FOB level last week.

Several dealers reported fairly brisk year-end business at the retail level, although one characterized it as more tire-kicking than actual buying. Others said growers were willing to commit funds but wanted to price actual product at a later date, when they believe retail fertilizer prices will be lower.

California: Granular urea was steady at $450-$455/st FOB and $450-$480/st DEL in the state in late December.

Pacific Northwest: Granular urea pricing was down from last report at $330-$350/st DEL in the region.

Western Canada: Granular urea was pegged at $521-$546/mt DEL in the region.

Pakistan: The TCP tender closed December 30. The company called for offers for 250,000 mt. The tender had been delayed from December 27 to 30. The tender required all prices to reflect delivered costs.

All told, a maximum of 570,000 mt firm offers were submitted. An additional 75,000 mt were offered at the seller’s option.

The netbacks for the Middle East tons indicate prices have not moved. The Black Sea material, however, shows a weakness that people talked about in mid-December but could not confirm.

Prior to the closing of the tender, industry sources had expected to see prices come up. They argued that the 500,000 mt purchased by IPL last month, coupled with the Pakistan and Bangladesh tenders, would move prices out of the basement.

Apparently that did not happen.

TCP is expected to talk with the lowest offering companies to try to shave even a few bucks off the offers. A decision is expected quickly.

Once settled, sources say this should cover the country’s needs for the current season.

Bangladesh: BCIC closed four tenders for 75,000 mt each of bagged prilled and granular urea.

The tender documents called for each shipment at 12,500 mt. Delivery is expected in early 2009. The shipments are to be in bagged cargoes of 12,500 mt each.

Results for the prilled tender follow.

The country reportedly desperately needs the urea.

Middle East: The offer made by Sabic in the TCP/Pakistan tender indicates that prices are softer, but not dropping.

The estimated netback from the tender puts the Sabic price at $240/mt FOB. This is just a shade under the IPL price from the region of $241-$243/mt FOB.

Black Sea: Asian sources put the lowest netback from the TCP/Pakistan tender at $205/mt FOB.

This price level confirms year-end rumors that the price from the area had softened. Even though people had talked about softer prices, no one could confirm anything lower than the previously done deals around $220/mt FOB.

Depending on the freight rate, the netback could be as low as $205/mt FOB or as high as $220/mt FOB on the lowest offer in the TCP tender.

India: Even though IPL concluded deals for about 500,000 mt just as the year ended, sources said more will need to be purchased within the next month. The amount of urea still needed for this season ranges from an additional 500,000 mt to 1 million mt.

NITROGEN SOLUTIONS

U.S. Gulf: A small amount of new business was reported over the holidays, taking the market to $190-$200/st FOB ($5.94-$6.25/unit).

Eastern Cornbelt: UAN-32 was pegged at $280-$295/st ($8.75-$9.22/unit), with the upper end quoted for spring prepay offers in Illinois. There were reports of one supplier offering prompt, cash market sales as low as $240/st ($7.50/unit) FOB regional terminals, but actual business at that level was not confirmed and very few have room for any cash tons.

Western Cornbelt: UAN was quoted at $8.75-$9.20/unit FOB regional terminals to the dealer, with the upper end reported for spring prepay offers from some suppliers.

California: UAN-32 was quoted at $380-$400/st ($11.88-$12.50/unit) FOB and $380-$410/st ($11.88-$12.81/unit) DEL in California in late December.

Pacific Northwest: UAN-32 was pegged at $350-$380/st ($10.94-$11.88/unit) DEL in the region. Agrium’s Dec. 12 UAN-32 postings included $350/st ($10.94/unit) DEL in Washington, northern Idaho, and Oregon excluding Malheur County; $355/st ($11.09/unit) rail-DEL and $360/st ($11.25/unit) truck-DEL in southern Idaho and Oregon’s Malheur County; and $380/st ($11.88/unit) DEL in Montana and northern Wyoming. UAN-28 reference prices moved on that date to $333/st ($11.89/unit) DEL in Montana and northern Wyoming.

Western Canada: UAN-28 pricing was quoted at $329-$345/mt ($11.75-$12.32/unit) DEL in the region.

AMMONIUM NITRATE

Western Cornbelt: The ammonium nitrate market was pegged at $250-$300/st FOB in the region, reflecting another pricing drop from last report.

California: No market was reported for ammonium nitrate in California. CAN-17 pricing remained at $315-$335/st FOB in the state.

Pacific Northwest: Ammonium nitrate pricing was down from last report, with sources quoting the dealer market at $368-$400/st DEL in the region.

CAN-17 was $250-$255/st FOB, reflecting a sizable drop from last report. Agrium’s CAN-17 postings moved on Dec. 12 to $255/st FOB Kennewick, Wash. The company’s ammonium nitrate solution (20-0-0) posting also moved on that date, to $210/st FOB Kennewick.

AMMONIUM SULFATE

Eastern Cornbelt: Granular ammonium sulfate was steady at $200-$210/st FOB or DEL in the region.

Western Cornbelt: Granular ammonium sulfate remained at the $200-$210/st FOB mark out of most locations, with the low for prompt tons and the upper end for spring prepay.

California: The ammonium sulfate market was quoted at $350-$385/st FOB in California, but sources said a downward pricing adjustment is expected in early January.

Pacific Northwest: The ammonium sulfate market was quoted at $220-$270/st DEL in the region, reflecting a $30-$50/st drop from last report.

Western Canada: Granular ammonium sulfate was reported at $350-$355/mt DEL in Western Canada.

PHOSPHATES

Central Florida: Any jingle heard in the Central Florida DAP market last week was undoubtedly Santa Claus, because it certainly wasn’t a telephone or a cash register. Those who bothered showing up for work were rewarded with golden silence. All was quiet and all was calm.

The year ended on a down note, with the price of DAP about $200/st FOB lower than a year earlier, and more than $700/st FOB down from six months ago. To make matters worse, little had been sold for the past three months. Buyers, it seemed, were looking for the bottom. Meanwhile, phosphate processing plants in Florida were at reduced capacity or shut down altogether.

Sometime, perhaps in another month, most in the industry were predicting sales, but not that prices would be taking off.

With no new sales last week, the Central Florida DAP price range remained at $300-$305/st FOB. CF had the lowest asking price at $490/st FOB. PCS Sales was still holding at $1,070/st FOB, and Mosaic had no posted price for Central Florida. The most recent price for Agrifos was $500/st FOB for trucks, but no price was available for rail shipments.

U.S. Gulf: Somewhat unexpectedly, a couple of NOLA DAP barges sales were done last week and they fell within the previous week’s price range, which could be a good sign. Perhaps the market has found that bottom it had so hopefully sought.

However, the problem between farmers and dealers remained. Many dealers paid $1,000/st FOB or more for the phosphate they have in their bins, and farmers were looking for prices of less than half that amount. How and if that is resolved will determine how many of the dealers, especially small ones, will be in business in the beginning of 2010.

At the end of last year, prices were more than double the current amount of a year earlier, which was closer to current price. The middle of the year was the high point and everyone was singing the praises of phosphate. Those were the good old days. The situation will be different for the New Year.

Phosphate production operations in the river system were curtailed or simply shut down, and there were nearly enough loaded NOLA DAP barges on the Mississippi to walk from New Orleans to Minnesota. That number will have to be greatly reduced before production resumes a normal schedule.

Based on transactions last week, the NOLA DAP barge price was unchanged at $275-$300/st FOB, and will not likely increase this week. Mosaic had no posted prices last week, and CF’s last price offering was $500/st FOB

Eastern Cornbelt: The DAP market was quoted at $400-$450/st FOB most river terminals to the dealer, with MAP priced either the same as DAP or at a $20-$25/st premium, depending on supplier. There were reports of Chinese phosphate tons priced as low as $350/st FOB out of spot Illinois River locations, but actual sales at that level were not confirmed last week.

10-34-0 was pegged in a broad range at $675-$800/st FOB in the region, with no new sales to test the market.

Western Cornbelt: The DAP and MAP markets were quoted at $400-$450/st FOB regional warehouses to the dealer, reflecting another drop from last report. The 10-34-0 market was quoted at $550-$675/st FOB in the region, also down from last report. The low end was reported in western Iowa, while Missouri sources tagged the common dealer price at the $625/st FOB level in late December.

California: DAP and MAP were steady at $595-$600/st FOB or DEL in the state. 16-20-0 was quoted at $380-$387/st FOB and $380/st rail-DEL in California, also unchanged from last report. 10-34-0 pricing, however, was quoted at $525-$535/st FOB, down some $200/st from last report.

Super phosphoric acid (SPA) and merchant grade acid (MGA) remained at December pricing levels of $11.50/unit DEL in the region, with Simplot referenced at $11.70/unit FOB for MGA in California.

Pacific Northwest: DAP and MAP remained at $585-$595/st FOB or DEL in the region. 16-20-0 was tagged at $380-$385/st FOB or DEL. 10-34-0 pricing in the region was quoted at $535-$570/st FOB.

SPA and MGA remained at $11.50/unit DEL in the region. One source talked of a potential posting hike to $12.00/unit DEL in January, but that pricing adjustment was not confirmed.

Western Canada: Western Canada sources tagged the MAP market at $790-$825/mt DEL to the dealer in late December.

U.S.Export: No export transactions were found last week, but that was to be expected.

India, which bought more than half of U.S. phosphate exports, wound up with the award for the most active supporter of the North American phosphate industry for 2008 and will likely be on top again for this year.

The export DAP price range last week ended the year at $390-$395/mt FOB.

Bangladesh: BCIC called a tender to close Jan. 2 for 15,000 mt of phosphate rock at 65 percent BPL or better.

The winner of the tender is to deliver the product within 21 days of receiving the letter of credit for the deal.

While many have complained about the way BCIC has handled its nitrogen tenders, sources have been complimentary about the efficient manner in which the phosphate tenders have been conducted.

India: Major suppliers are reportedly still dragging their feet on new phos acid contracts. However, local sources report that IFFCO is able to obtain product as low as $650/mt DEL from its joint venture partner ICS Senegal. Foskor from South Africa is reported to be supplying product on a provisional basis at $1,200 mt DEL.

No new agreements were reported on rock; however, sources say in light of the phosphate market, they would have to be much lower.

POTASH

Eastern Cornbelt: Potash was quoted at $750-$800/st FOB regional warehouses, depending on grade and location. Sources continued to speculate on whether potash pricing would hold its ground or fall. Several dealers said they would not need to buy any potash tons until late spring, based on the amount of inventory they already had in the bin.

Western Cornbelt: Potash was quoted in the $750-$775/st FOB range, though there was minimal business to test the market. The low end of the range was reported for red granular tons in both Missouri and Iowa, while white granular potash was quoted by one Missouri supplier at the $760/st FOB mark last week.

California: Muriate of potash was steady at $849-$900/st FOB and $875-$900/st DEL in the region. Sulfate of potash remained at $1,105-$1,195/st FOB, depending on grade and supplier. Potassium nitrate was steady at $1,310-$1,380/st FOB in the state, with the low for bulk and the upper end for bagged product.

Pacific Northwest: Potash remained at $840-$900/st DEL in the region.

Western Canada: No current prices were reported for potash in the region.

SULFUR

Tampa: After reaching a high price no one ever dreamed possible during 2008, the price ended the year at a price the sulfur industry had only dreamed of in the past. However, even that bit of good news won’t last for long. First quarter sulfur price negotiations will begin shortly and the new price will likely be somewhere around where it started in 2007 – but only if the sulfur interests do a bang-up job in the discussions. Otherwise, the price could be worse than the industry ever dreamed.

Phosphate processing plants, which normally account for about 75 percent of sulfur’s consumption, were curtailed or shut down and had no room for more sulfur. With the recession threatening to grow worse, other industries were also cutting back on consumption.

Meanwhile, Martin was rushing to complete its second priller at Beaumont and sulfur was still being blocked at Galveston. Motorists were driving less and fuel consumption was down, and production of gasoline was following the trend.

MARKET NOTES

China: The Chinese government is accelerating reforms to the fertilizer industry that could lead to some regional disruption in the domestic fertilizer market.

Changes approved by the State Council in the last two weeks of the year will allow for the price of urea and various phosphates to shift with the market instead of adhering to strict government prices.

The government will continue relief on electricity, gas, and railway charges. Some local tax breaks will also be continued.

The decision also does not address local subsidies to fertilizer plants.

In the past, provincial and local governments have provided some financial support to local producers to ensure the continued employment of the local work force. Many of the smaller plants that have come to depend on these local subsidies are viewed by international fertilizer traders as the most expensive and inefficient plants operating in the country.

The central government has discouraged local governments from subsidizing factories that cannot compete in the market. The local governments, however, feared rising unemployment or angry farmers more than budget deficits, and kept the subsidies flowing.

The decision by the central government to move fertilizer supply and distribution is another step, said one international trader, to getting rid of the inefficient plants. Even if a number of the older plants closed, this trader said, China would still produce enough urea to satisfy farmers’ needs.

Beijing had earlier revised its export duty schedule from one that imposed a virtual ban on all exports. Duties of 35 percent and an additional tax of 150 percent were imposed on urea exports to push the domestic price down to satisfy farmer demand.

The resulting lower prices began driving some producers near bankruptcy unless some state subsidies were supplied.

The new measures, coupled with the changes in the export tariffs, are designed to allow market forces to set the urea and phosphate price.

The new policy did not address possible subsidies to farmers to help them smooth out the ups and downs of fertilizer price changes. In recent years the central government has been removing some restrictions on what farmers could charge for their crops.

The price for potash will continue to be regulated by the central government. Potash is the one key fertilizer input China is still required to import.

Russia: The government is discussing the creation of a state holding company, consisting of raw material producers for mineral fertilizers, several industry sources told the Interfax news agency. Specifically, the government is reported to be eyeing a proposal to buy controlling stakes in potash producers Uralkali and Silvinit and phosphate maker Apatit and merge the three. Sources noted that all three have sought government support, and Uralkali is under review for the mine accident at Berezniki.

Poland: Local sources report that the fertilizer industry has not been hit as hard by the global financial crisis as other industries in the country, though there are significant concerns about getting natural gas from Gazprom. Officials say Gazprom is reluctant to sign new agreements.

Prime Minister Donald Tusk is rather optimistic after his November visit to Qatar and Kuwait, where he held talks on gas delivery and possible investment in fertilizers and chemical industries. He is also planning a January 2009 visit to Saudi Arabia, which expressed earlier interest in fertilizer industry, oil delivery, and construction projects in Poland.

South Korea: The South Korean government said it would not restore vital aid to North Korea unless the Pyongyang government resumed talks on re-unification and denuclearization.

“As long as North Korea shows no change in its attitude, the situation is expected to remain the same as now,” Unification Minister Kim Ha-Joong told the South Korean news agency Yonhap.

South Korea has provided fertilizer to its northern neighbor for the past several years. That aid was combined with other programs to help lift North Korea out of its famine conditions and poverty.

The aid stopped in early 2008 when the north walked out of talks following the election of Lee Myung-Bak as president in the south. Despite offers from Seoul to continue fertilizer and rice shipments as humanitarian aid, the Pyongyang government refused to accept support from the conservative Lee government.

The announcement by Kim that aid will only resume once North Korea returns to a series of talks with South Korea came as Kim was briefing the president on policy goals for 2009.

Shipments of fertilizer to the north started less than a decade ago, when famine struck North Korea. Initially, the North Korean government refused any fertilizer from the south that came in bags that clearly showed South Korean origin.

At first, some material was re-bagged by international humanitarian organizations. Eventually the north accepted direct deliveries from South Korea.

Previous shipments of urea and NPKs to North Korea have totaled as much as 600,000 mt per year.

Israel: ICL Fertilizer, a unit of Israel Chemicals Ltd., is cutting production, according to the Israeli press, which reports that the company will be reducing phosphate production in Israel. In addition, ICL will cut potash production at two plants in Europe; however, it will continue to produce the product in Israel, with new European sales using potash stockpiles in Israel. More specifics from ICL were not immediately available.