Fertilizer sales at UAP Holdings Corp. were up 27 percent for the second quarter ending Aug. 26, 2007 (fiscal 2008), to $198.7 million from the year-ago $156.5 million, just passing seed sales, which were up 25 percent. Six-month fertilizer sales were up 38.3 percent, to $678.8 million from the year-ago $490.8 million, while seed’s percentage increase was less dramatic at 12.1 percent.
Company-wide, UAP posted net income of $35.0 million ($.66 per diluted share) on sales of $862.5 million for the second quarter, versus a year-ago loss of $4.3 million ($.08 per share) on sales of $767.8 million. Six-month net income was more favorable at $122.7 million ($2.32 per share) on sales of $2.47 billion, up from the year-ago $54.0 million ($1.03 per share) and $2.16 billion, respectively.
UAP said second-quarter improvements were driven by acquisition activity and higher fertilizer prices. UAP noted that 75 percent of its annual net sales occur in the first half. It is standing by annual guidance of $1.60-$1.75 per diluted share, excluding any dilution from potential acquisitions.
As for those potential acquisitions, UAP President and CEO Kenny Cordell told analysts that he expects the company to add at least $300 million in new acquisitions by the end of the fiscal year, matching those of the previous year. Questioned as to whether UAP would consider the remaining retail assets of Agriliance LLC, Cordell said yes, though he noted a deal is in the works for another to buy those assets. He said the company has made three small acquisitions so far this year and that the pipeline is rich.
As the company continues to invest in fertilizer, it will aggressively hire more sales people, according to Cordell. He said hiring these people is the cheapest, most efficient way to grow the business.
Cordell also related that the UAP board has given approval to two new projects that are expected to be up within a year. He said the land has already been purchased, but declined to give more specifics until the next quarter. He likened the new projects to those reported earlier this year in Alabama, Ohio, and Washington (GM June 18, p. 10; July 16, p. 11), which increased dry and liquid fertilizer storage capacity. The combined cost of those was approximately $4 million for the quarter ending in May, though another phase to the Alabama project was expected this fall.
Cordell also noted that UAP has separated its retail and wholesale businesses into two groups; though he said it was not decided if this would be reflected in earnings statements. The reorganization occurred within the past month. Heading up wholesale is Dan Tretter, retail Dean Williams and retail operations Dave Bullock.
Cordell said that the company’s first half could not have been better if it had been planned. He said major movement in fertilizer for the rest of this year will occur November through December and he is optimistic, though he cautioned that the company has been burned the past two years by fall fertilizer sales.
This time around Cordell noted robust prices for all the major agricultural crops, saying he expects a tremendous wheat crop and a stable corn crop next year, in the neighborhood of 90 million acres. He was not concerned about an oversupply of ethanol causing a significant decrease in corn acreage. He does not foresee any major shifts between crops, as occurred this year when some 14 million acres were pulled from soybeans and cotton to corn. As for cotton, he said he would bet that it would more likely drop another 5 percent in acreage than increase. He said that this year Southerners discovered that they could grow corn, and would likely continue to do so.
On the fertilizer market, he said phosphates and potash are tight and that nitrogen imports are yet to arrive.
Going into next year, Cordell said farmers’ income is at an all time record high, and that they are looking to invest that money. As a result, he expects a big fall prepay season.
Eastman Chemical Co., Kingsport, Tenn., and Terra Industries Inc., Sioux City, Iowa, said Sept. 28 that Eastman has exercised its option to purchase Terra’s Beaumont, Texas, assets, including ammonia and methanol production facilities (GM July 23, p. 8). The closing is expected on or before Jan. 1, 2009. Terra has an ongoing commitment with Methanex with respect to the Beaumont plant through 2008. Terms of the sale agreement were not disclosed.
Eastman will incorporate the assets into a previously announced $1.6 billion industrial gasification project it is developing at Beaumont. Mark Costa, Eastman senior vice president of corporate strategy, said Eastman will be a developer, operator, co-investor, and customer for that project. “Exercising this option brings Eastman one step closer to construction of a new gasification facility,” Costa said. “We continue to meet our targets and remain on schedule.”
Eastman says front-end engineering and design for the facility, which will utilize petroleum coke as its feedstock, will begin immediately, with construction expected to be underway by early 2009. Eastman expects the plant to be online in 2011. Since 1983, Eastman has successfully operated a gasification facility at its Kingsport headquarters, supplying the company with methanol and acetyl streams used in the production of acetate resins, of which it is the world’s largest producer.
The gasification facility will produce hydrogen, methanol, and ammonia, chemical industry feedstocks that are usually derived from oil or natural gas. These feedstocks frequently serve as the base material for everyday products ranging from plastics, paints, and photographic film to pharmaceuticals.
Eastman told Green Markets that it has no plans to build additional ammonia capacity at Beaumont at this time. The Beaumont facility currently includes 255,000 st/y of idled ammonia capacity. It also has the capacity to produce 225 million gallons per year of methanol, and includes storage capacity for both methanol and ammonia.
Eastman anticipates a 50 percent equity position in the project and expects to announce a financial equity investor soon.
The Beaumont project involves multiple companies, with more pending. Air Products & Chemicals Inc. has signed a letter of intent to purchase hydrogen produced by the project on a long-term basis. It will construct and operate new world-class air separation units to produce over 7,000 tons per day (TPD) of oxygen, essential to the gasifier operation. Fluor will support the front-end engineering design effort. GE has licensed its gasification technology for the project.
The new facility is expected to generate 1300-1500 construction jobs and more than 250 permanent jobs, accounting for more than $686 million in direct and indirect employee compensation over a ten-year period. Eastman says the new facility will generate an additional $124 million in local tax revenue and a $210 million increase in local sales revenue over a ten-year period. Local officials have approved incentives valued at about $100 million for the project.
Terra President and CEO Michael Bennett said Terra is pleased with this opportunity to divest these assets in a move that is consistent with its desire to focus on its core nitrogen business.
In addition to the Beaumont development, Eastman will also be an operator, co-investor, and customer of another $1.6 billion petroleum coke-based project at Faustina Hydrogen Products LLC (FHP) in St. James Parish, La. Eastman has provided development funding for this project, with the intent to take a 25 percent equity position. Eastman will also provide operations and maintenance services and purchase methanol under a long-term contract. This facility is expected to be online in 2010.
The FHP facility will also produce 1.3 million tons of anhydrous ammonia. Agrium Inc. and The Mosaic Co. will both have offtake agreements at 40 percent and 60 percent, respectively (GM June 18, p. 1). Agrium also has the option to obtain a sufficient supply of carbon dioxide for the potential development of a large-scale facility for upgrading ammonia to UAN/urea. Neither Agrium nor Mosaic is expected to have an equity stake in FHP.
Two western environmental groups don’t have the facts to back up their charges that phosphate mining companies are in collusion with the Forest Service and Bureau of Land Management to cover up selenium pollution in southeastern Idaho, according to industry and federal agency officials. The Greater Yellowstone Coalition (GYC) and Caribou Clean Water Partnership are claiming the phosphate industry and federal land managers knew about the harmful effects of elevated selenium concentrations in the area for decades before the problem was made public. They report that the pollution came to light because of a 1996 incident when several horses were euthanized after becoming poisoned by selenium in a pasture downstream from one of the phosphate mines.
“It’s been documented that these companies and the agencies have known about the dangers of selenium for years but kept quiet about it,” Marv Hoyt, Idaho director for GYC, told Green Markets. “The companies are getting away with doing just enough to make it look like they’re working on the problem.”
The J.R. Simplot Co., which is seeking federal approval to expand its Smoky Canyon mine near the Idaho-Wyoming border, responded that the documentation cited by the accusers has no basis in fact and that the truth is that phosphate mining on public lands in Southeast Idaho has occurred only under the direction and approval of state, tribal, and federal agencies, including public comment and participation.
Lynn Ballard, spokesman for the Caribou-Targhee National Forest and BLM, also denied the allegations. “Are we in collusion? No. Have we done anything wrong? No,” he said.
The report in question was produced by Edgar Imhoff, a retired federal hydrologist and environmental cleanup authority. After reviewing thousands of pages of documents obtained from federal agencies through the Freedom of Information Act earlier this year, Imhoff concluded that mining companies and federal agencies have purposefully colluded for years to cover up knowledge of potential harm from selenium contamination, as well as when such harm was known. Environmentalists say the problem is caused by phosphate mining exposing rocks rich in selenium, which leaches during rainfall and snowmelt and enters surface and ground water. From there it can move up the food chain, from phytoplankton to fish to birds, livestock, and people.
Simplot spokesman Rick Phillips insisted that the Smoky Canyon Mine was reviewed and approved by a federal environmental review process, requiring public access and comment on all environmental effects of the project, as well as the proposed mine plan. Phillips noted, “When selenium was identified as a source of ecological risk in 1997, Simplot, along with all other phosphate companies, aggressively began investigating the sources and all possible ecological effects of selenium releases. University of Idaho experts on selenium with experience at other selenium impacted sites conducted research and field studies to help identify possible sources and impacts.” He said these investigations and studies were conducted under the direction, approval, and review of federal and state agencies, and were open for public participation and comments. Work on addressing the major source of selenium at Smoky Canyon, the Pole Canyon area, will be completed this year.
Phillips added that the proposed Smoky Canyon expansion will use the best practices identified throughout this extensive investigation, including technology whereby an impermeable barrier will be installed on top of rock overburden to reduce water infiltration. In addition, the rock layers of earth naturally containing elevated selenium will be carefully managed and placed back into their original area. Also, extensive environmental monitoring and evaluations are planned throughout the extraction process to ensure these protections are working.
Still, Hoyt insisted that the deaths of domestic livestock, sheep, and horses have been traced to selenium toxicity, which is also a threat to waterfowl and fish. Hoyt said GYC has petitioned the U.S. Forest Service and EPA to list selenium as a hazardous waste and has received some encouragement from the latter. “If the EPA does the assessments and rates the mines it will serve to push the companies harder to start cleaning up those sites,” he suggested.
Richard Downey, spokesman for Agrium, which also has phosphate operations in southeast Idaho, said his company has been proactive on selenium for nearly two decades. “Agrium takes its commitment to environmental, health and safety very seriously. We continue to work with state and federal agencies and to meet and improve on mining guidelines and practices. We have been very active in addressing this specific issue since Agrium acquired these properties in the mid-1990’s.”
Omaha-ConAgra Foods Inc. earnings continue to see a giant boost from its fertilizer business, along with other commodities within the company’s Trading and Merchandising (T&M) unit. Operating profits from the T&M segment were up 384.6 percent for the first quarter ending Aug. 26, 2007, versus the year-ago quarter. T&M profits were $75.6 million on sales of $327.9 million, versus the year-ago $15.6 million and $205.4 million, respectively. The company singled out fertilizer and energy trading as being very successful in capitalizing on market opportunities. By comparison, ConAgra-wide net income was up only 5.2 percent, to $175.4 million ($.36 per diluted share) on sales of $2.95 billion, versus the year-ago $166.7 million ($.33 per share) and $2.69 billion, respectively. ConAgra believes it can attain a fiscal year EPS of $1.48. In addition, ConAgra believes second quarter EPS will be in line with year-ago levels, and sees a likely slowdown in the quarter from its T&M business.
Atlanta-Spectrum Brands Inc. has announced the signing of a definitive agreement to sell the Canadian division of its Nu-Gro home and garden business segment to a new company formed by RoyCap Merchant Banking Group and Clarke Inc. Financial terms were not disclosed, but Spectrum reported the transaction is expected to close by Oct. 31, subject to certain regulatory approvals. The division, described as a leading home and garden supplier in the Canadian market, had FY2006 sales of approximately $100 million across a broad range of product categories, including fertilizer, grass seed, controls, and ice melt, under brand names such as CIL, Wilson, and Alaskan Ice Melter. Spectrum CEO Kent Hussey commented, “The Canadian division of our home and garden business segment is a valuable business that enjoys strong consumer recognition, a national distribution network and a broad and loyal customer base, and we are pleased to have found in the RoyCap/Clarke partnership a buyer that is a good fit for this asset. Following the sale of this division, which was not a profit contributor in our most recent fiscal year, Spectrum’s remaining U.S.-based home and garden business will be a more sharply focused company with improved operating margins and returns on invested capital.” Net proceeds from the sale will be utilized to reduce outstanding debt, a key strategic priority for Spectrum Brands. The company currently estimates that the sale will reduce FY2008 peak seasonal borrowing needs by approximately $45 million as a result of cash proceeds from the transaction and the elimination of the working capital requirement for the Canadian home and garden business in the 2008 lawn and garden selling season.
Woodland, Texas-CVR Energy Inc., the owner of Coffeyville Resources, the refinery and nitrogen producer with plants in Coffeyville, Kan., is increasing the amount of stock it wants to sell under its IPO (GM Sept. 17, p. 1). CVR now wants to sell 18.5 million shares, valued at $425.5 million, versus the prior 15.5 million valued at $375.0 million. In both cases, there would be total shares of 81.6 million, with the percentage going into the IPO increasing to 22.7 percent from 19 percent. CVR will use the proceeds from the IPO to pay off loans.
Tampa-Ameropa North America has announced that they have entered into an agreement with Kinder Morgan Terminals, the nation’s largest independent terminal operator, to house product at Shipyard River Terminal in the Port of Charleston, S.C. Ameropa will have exclusive storage and handling rights to a 40,000 st warehouse situated on both the CSXT and Norfolk Southern railroads. Ameropa intends to market urea from this facility, while future expansion could involve the distribution of potash, TSP, and CAN. For further information about this facility, please contact Nick Adamchak or Mike Ward at 813-282-8228.
Des Moines-Iowa environmental investigators will be issuing a citation to Golden Furrow Fertilizer Inc. at Fairfield after identifying the source of ammonia and other chemicals responsible for the deaths of thousands of fish, according to natural resources authorities. The fish kill last month involved a 3.3-mile stretch of Crow Creek and an unnamed tributary. Authorities also said the state will seek restitution for the 7,681 fish killed. Restitution and costs incurred during the investigation are expected to amount to approximately $12,358. They said additional enforcement actions could be forthcoming following completion of the investigation. The kill was reported Sept. 14 to Iowa Dept. of Natural Resources officials, who said the ensuing investigation led to a drainage pipe on the Golden Furrow property that drained to an unnamed tributary and eventually to Crow Creek. Reports indicated dead fish were observed below the drainage pipe, but none was found above. Recent test results from water samples taken at the source at the time of the kill showed ammonia readings of 130 parts per million, a level toxic to fish. Smaller levels of various herbicide and pesticide chemicals were also detected in the samples. The lead investigator in the DNR field office hadn’t filed his report, so there was no indication of what had been released into the creek or how much and what the circumstances were. Crow Creek runs through the city of Fairfield; the Golden Furrow site is located on the north side of Fairfield.
Reno-Itronics Inc. has announced a major move to diversify and increase revenues. The company’s board has approved the formation of two special purpose subsidiaries to develop and commercialize environmentally friendly mining and mineral extraction and processing technologies. One subsidiary will research, develop, and commercialize the photochemical based thiosulfate technology to replace or neutralize cyanide, which is currently used in mining operations and which has been criticized for its impact on the environment. Itronics’ new technology is expected to be used for mineral extraction, including mine tailings, and reclamation of heap leach operations. The other subsidiary will acquire multi-mineral properties and strategic small specialty companies that are in early stage or commercial operation. These can be combined to form a larger operating company that will utilize advanced environmentally compatible technologies to mine, extract, and sell mineral and metal products from multi-mineral properties. “This is a third pathway to large scale growth for Itronics,” said Dr. John Whitney, Itronics president. “A major component of the photochemical wastes we turn into environmentally beneficial fertilizers is able to completely detoxify and eliminate cyanide, which is the main ingredient used to extract gold and silver out of low-grade ore. The mining industry has long sought a way to make this process environmentally benign.” The other pathways are the company’s environmentally beneficial Gold’n Gro fertilizer to large agricultural entities, and the sale of Gold’n Gro Guardian deer repellent fertilizer. In other news, Itronics reported Oct. 4 that third quarter 2007 Gold’n Gro fertilizer division sales by its subsidiary, Itronics Metallurgical, Inc., were $535,000 compared to $295,000 in the comparable quarter last year, an increase of 82 percent. Third quarter Gold’n Gro liquid fertilizer sales were $242,000, up 66 percent. For the first nine months of 2007, Gold’n Gro fertilizer division sales were $1.914 million compared to $1.393 million in the comparable period last year, an increase of 37 percent, while liquid fertilizer sales were $1.411 million, up 35 percent during this period. “Third quarter Gold’n Gro liquid fertilizer sales increased due to an expanded customer base,” said Whitney.
U.S. Gulf/Tampa: The market remained quiet last week, with the last done Tampa business reported at $305/mt DEL. Higher price ideas were discussed for NOLA, with the last done reported at $277/st FOB.
Eastern Cornbelt: Ammonia pricing continued to firm, with several sources commenting that fall movement was still about 10 days away in the region. Sources quoted the spot market at $505-$515/st FOB terminals, up significantly from last report, with the low end reported in Illinois and the upper numbers in Indiana.
Forward contract ammonia for November through December was available at $510-$520/st FOB in the region from one supplier, and spring prepay was reportedly being offered in the $520-$525/st FOB range in the region last week.
Western Cornbelt: The ammonia market continued to firm. Sources quoted prompt tons at $485-$505/st FOB in the region, with the low in Nebraska and the high in Iowa last week. Spring prepay was reportedly being offered at the $500/st mark in Nebraska and higher at other regional shipping points. Forward contract ammonia for November through December was available from one regional supplier for $495/st FOB in Nebraska, $505/st FOB in Iowa, and $510/st FOB in Missouri.
Northern Plains: Dealers reported some fall ammonia applications underway last week, and spot pricing was up from last report. The ammonia market was quoted at $495-$505/st FOB in the region, depending on time of delivery, with the upper end reported for forward contract tons for November through December. North Dakota sources pegged the delivered market at a firm $525/st last week for very limited tonnage, with reports that some producers were not referencing a price due to temporarily sold-out inventories.
Agrium’s anhydrous ammonia firmed again on Oct. 1 after an earlier increase in mid-September. Reference levels moved on Oct. 1 to $530/st FOB and $550/st DEL in the Leal, Velva, Grand Forks, and Beulah sales area in North Dakota, a $30/st increase from the company’s Sept. 18 postings. Other ammonia postings from Sept. 18 included $495/st FOB Mankato, Minn.
Great Lakes: The spot ammonia market was a difficult one to call in the region last week. A Wisconsin source tagged the low end at $490/st FOB, but others claimed a firm $505/st FOB for prompt ship and as high as $520-$525/st FOB for spring prepay.
One regional supplier was offering forward contract ammonia for November through December at the $520/st mark FOB Huntington, Ind.
Western U.S.: Agrium’s anhydrous ammonia postings firmed on Oct. 1 to $485/st rail-DEL and $505/st truck-DEL in northern Idaho and in Oregon and Washington east of the Cascades, and $520/st truck-DEL in Montana and Wyoming. Aqua ammonia postings from the company firmed on that date to $127/st FOB Central Ferry and Finley, Wash.
Black Sea:Reports from the area say the new KIP is set at a safe $270/mt FOB. Asian sources called that number safe because the current pressure is to get the price closer to $290/mt FOB.
Producers are reportedly asking $290/mt FOB, but getting no takers. The price was reportedly in the $270-$285/mt FOB range.
Just how much longer that level can be maintained is up in the air. Industry observers note that many of the area producers will be coming out of their routine turnarounds in the next couple of weeks. By mid-November, one source said, all the plants will be up and running at full capacity.
Even with the tightness in the Asian buying market, sources speculate that the November prices will be coming off the current levels.
One observer commented that even with all the plants running, he sees few signs of relief for buyers.
The Russians continue to move up the price of natural gas. The increase in that basic feedstock item, sources say, could provide a serious counterbalance to the increased production expected next month.
Even with prices at high levels, sources say traders are still sending vessels to the port to pick up whatever tons they can get. One trader said it still makes sense to keep the ships working and moving tons than to just let the vessel sit at anchor while everyone waits for the price to come down.
For now, say sources, the price remains in the mid-to-upper $280s/mt FOB, with producers hoping for $290/mt FOB.
Middle East: Reportedly, BPL/India is in talks with producers to nail down a one-year contract. Sources say the talks were by invitation only and could mean contracts totaling 300,000 mt next year.
So far the area’s producers remain comfortable, but still seem unable to push the price into the $240s/mt FOB.
Rumors keep surfacing about a completed deal at $240/mt FOB, but details tend to disappear like a morning mist.
Reports that Indian DAP producers are once again talking to phos acid suppliers are music to the ears of ammonia producers in the area. If the Indian DAP producers are looking for more acid, that could mean they will be cranking up their production – and that means more ammonia to sell to India. And this comes at a time when producers are reportedly sold out for October and most of November.
Adding to tightness in the regional market are reports that the IPCC/Iran #3 plant will not be up and running any time soon. Sources said a couple of major trading houses were counting on the plant to be up and running by now.
Qafco settled with FACT under the Indian buyer’s tender last week at $271-$273/mt CFR. Sources say the netback is $231-$235/mt FOB. Others say, however, that by playing with the freight numbers the netbacks could be $231-$238/mt FOB
Until new public deals come out, sources say the market remains stable at the levels set from the Qafco sale to FACT.
India: Buyers from BPL are said to be holding invitation-only negotiations with a set of producers to nail down a 2008 supply contract. The buyer is expected to sign a deal for about 300,000 mt. Prices will be negotiated based on tenders and market conditions, one source said.
Even with its DAP production not at expected levels, sources say India’s ammonia imports are well above last year’s.
The figures for January-August 2007 are pegged at 1.4 million mt. Last year’s numbers for the same time period are 1.2 million mt. This increase in ammonia purchasing is occurring at the same time DAP production is down. A year-on-year comparison for the first eight months of 2006 and 2007 shows production at 3.3 million mt and 2.9 million mt, respectively.
Asia: Sources say downstream users of ammonia seem to be unhappy about the tightening market and the higher prices that are expected. However, their sullen mood is tempered by the strength of the strong downstream markets.
Sources say no one is happy to pay more, but the end users are all showing such financial strength in their own markets that the extra cost for ammonia is only a mild irritant.
UREA
U.S. Gulf: Granular barge prices continue to quickly work their way up last week. While some said you could still buy a barge in the low-$350s/st FOB early in the week, most said by the end of the week prices had easily moved through the mid-to-high $350s/mt FOB into the $360s/st FOB. The high for the week was reported at $363/st FOB. While actual prill trades were hard to find, sources said they would have at least been in line with granular.
Most observers were astonished at how fast and furious prices have moved up in just a few weeks. January and February cargoes were being called in the $370s/st for physical product and the $380s/st on the swaps market.
Eastern Cornbelt: Granular urea pricing was up at $380-$385/st FOB in the region.
Western Cornbelt: Granular urea pricing had reportedly firmed to $380-$390/st FOB in the region. The dealer market FOB Dubuque, Iowa, was pegged at the $385/st mark last week.
Northern Plains: Granular urea was reported at $375-$380/st FOB the Twin Cities last week. Dakota sources pegged the urea market at $395-$400/st DEL and in tight supply. Agrium’s granular urea postings firmed on Oct. 1 to $395/st FOB Shakopee, Minn., and North Dakota terminals at Alton, Carrington, Colfax, Marion, and Scranton; and $400/st rail-DEL in Minnesota, Wisconsin, and the Dakotas.
Great Lakes: Granular urea was pegged in the $385-$410/st FOB range, with the low in Wisconsin and the high in Michigan. Delivered urea in central Wisconsin was quoted at $395/st last week. Agrium’s granular urea postings firmed on Oct. 1 to $400/st rail-DEL in Wisconsin.
Northeast: Granular urea was quoted at $380-$385/st FOB Baltimore, Md., and as high as $395/st FOB E. Liverpool, Ohio, to the dealer. Prilled urea was reportedly available at the $384/st mark FOB E. Liverpool. One supplier was reportedly referencing granular urea as high as $420/st FOB in New York in early October, although no sales were confirmed at that number.
Western U.S.: Agrium’s granular urea postings firmed on Oct. 1 to $395-$410/st DEL in Montana and Wyoming, depending on location; $420/st FOB Washington warehouses at Glade, Kennewick, Warden, and Wilson; $425/st DEL in Washington, Oregon excluding Malheur County, northern Idaho, and northern Nevada; $435/st DEL in northern and central Utah; and $440/st DEL in southern Utah.
India: IPL closed its much-awaited tender Oct. 4. Any hopes IPL had of getting a bargain were swept aside as offers of material from China, the Middle East, and Bangladesh showed a stronger market than in previous Indian tenders.
At the low end of the offers was Ameropa at $345.50/mt CFR. At the high end was ConAgra at $403/mt FOB.
Offers follow.
Offerer
Pr/Gr
Origin
Quantity ‘000 mt
Shipment
US$/MT
FOB
CFR
Transammonia
P
China
200
End Oct –
347.50
30-50
348.50
150
Early Dec
349.50
Ameropa
P/G
Open
25
Oct
345.50
25
Oct
345.50
25
Nov
370.00
25
Dec
370.00
Helm
P/G
Open
100 in 4-5 lots
Oct/Nov
347.00
Optional
50
Oct/Nov
356.00
Toepfer
P
China/Open
2×20-25k
Nov-Dec 15
346.50
1×20-25
Nov 15-Dec
363.50
Optional
1×20-25
368.50
373.50
375.50
Kisan Int.
P
China
25
Nov
356.00
Swiss Singapore
P
China
25
Oct/Nov
360.00
362.00
Balderton
P
Open
20-25
Oct/Nov
355.00
Optional
20-25
Yemkay
Open
25
Oct
375.00
25
Nov
375.00
United Telecom
Open
25
Oct
377.00
25
Nov
377.00
ConAgra
P
Open
25-30
Oct 20/Nov20
403.00
25-30
Nov/Dec
403.00
Sabic
P/G
Saudi Arabia
25
Nov
348.00
Optional
25
Nov
25
Nov
Qafco
P/G
Qatar
20-25
Nov/Dec
348.00
Fertil
P
UAE
20-25
Nov
348.00
20
Nov/Dec
348.00
Egyptian Fert. Co
G
Egypt
30
End Nov/Dec
366.00
The Middle East suppliers took advantage of the strengthening market to push their price up dramatically. The Sabic and Qafco offers show a continued mentality of running prills and granular at parity, at least for India.
PIC/Kuwait did not offer material, nor did Keytrade or CFIC. Sources said PIC does not have the tons to offer for the November-December window. The reasons for CFIC and Keytrade staying out of this important tender are unclear to sources in Asia.
As of late Friday, offering companies were closeted in meetings trying to nail down an award while IPL keeps hammering for lower prices. The best guess is that no deals will be closed until Monday, although there are reports that some traders are canceling their weekend plans.
Last month reports circulated that Ameropa, ConAgra, and Transammonia concluded deals with IPL for at least 200,000 mt at $335/mt CFR.
With the conclusion of the tender, sources now say the companies with pre-tender agreements were actually Ameropa with 50,000 mt, Helm with 100,000 mt, and Transammonia with 400,000 mt.
The 550,000 mt offered by these companies in the tender reflect the handshake deals that were done last month. The prices offered in the tender reflect averages of the September price and the current market value.
How many tons overall IPL will take beyond the pre-tender tons is up in the air. Sources speculate that an additional 300,000 mt will be picked up.
After this business is concluded, sources say Indian buyers will still need to buy an additional 500,000 to 1 million tons by the end of the year.
For now, China came out as the big winner and Yuzhnyy the big loser.
The Yuzhnyy price is too high for consideration. Industry observers are now watching to see if the Black Sea market will revert to form and crash on the heels of this tender. Few are expecting this to happen this time because of the strength of other markets.
Black Sea: Producers here might feel a twinge of regret that none of their material made it into the IPL/India tender, but that was calmed by Latin American buyers paying top dollar. Sources report $333/mt FOB was definitely done last week. They add that the estimated netbacks range from $335-$336/mt FOB, but these levels were merely guesses. The $333/mt FOB is solid, said one trader.
Yuzhnyy is sold out for October, and its November sales look healthy as well. The only material that might be found in the Black Sea, one source said, are top-off tons. A trader noted that these tons might be what is being quoted in the upper $330s/mt FOB.
Adding to the good month Black Sea suppliers are having are reports that the Baltic suppliers are also sold out. With no place else to turn, traditional Baltic buyers are looking further east for their urea.
On the negative side, the Yuzhnyy market regularly drops following an Indian tender. Asian sources figure that the drop will be dramatic this time because there are no other markets to compete with India in terms of the sheer volume of purchases.
Middle East: Even by normal aggressive Middle East standards, the offers in the IPL/India tenders were breathtaking. The $348/mt FOB offers represent a jump in prices of more than $20/mt. Asian observers note that this price may be just an opening gambit. If history is a guide, their observations have validity.
In previous tenders, the Middle East suppliers offer high, the Indians bid low, and they reach an accommodation. Many times the agreed-to price is closer to the offer than the bid, but both sides leave the table happy.
The bottom line, said one trader, is that the Middle East producers will have to fall in line with the prices offered by the large trading houses. That will mean selling to India in the upper $340s/mt CFR or mid-$350s/mt CFR at the most.
Once freight is backed off from the higher price, sources say the producers will be at $330/mt FOB at best.
This price fits with what people were hearing just prior to the tender announcement. Producers were reportedly telling other buyers they would not even consider talking about a deal unless $330/mt FOB was on the table.
One trader said he was convinced some material was available in the $330s/mt FOB, but could not point to a specific deal to back up that conviction. Likewise, he said, until the ink dries on an Indian-Middle East deal, no one is going to believe the market moved into the upper $340s/mt FOB.
The tender also showed that the producers are more willing than in the past to offer prills and granular at parity.
Asian sources commented that once Indian buyers were willing to take prills or granular instead of just prills, the two Middle East market prices moved closer together.
For now, sources put the prilled and granular markets at $320-$325/mt FOB, with the caveat that a firm position by the producers and a desperate need by India could move the price beyond that level.
China: Even as traders offered large quantities of Chinese tons in the IPL/India tender, sources say no one is sure how many of those tons will actually move out in a timely manner. Port congestion remains an issue. The “Golden Week” holiday for China’s national day did not help matters. Sources say with everyone on vacation, nothing moved out of the port warehouses.
Global buyers were waiting for Oct. 1, when the export duty was halved to 15 percent, but with the weeklong holiday nothing was moving. Traders note that nailing down vessels willing to go to Chinese ports for urea remains difficult.
The entire urea export operation situation is reminiscent of Catch-22: The warehouses are so full producers are unwilling to give firm numbers for new business. The warehouses are full because for the past month and a half everyone was waiting for the export duty to drop. Once the duty dropped, the port workers went on holiday. Ship owners, in the meantime, were reluctant to send vessels to the ports because they could not get firm loading times. The difficulty in getting vessels ensures ports will remain clogged, and so the cycle begins again.
International traders, however, are optimistic that the situation will work itself out by the end of October. Many of the Chinese tons being offers in the IPL tender are slated for November or December delivery, and shipping times to India are not long.
Pakistan: The government has decided to import 100,000 mt of urea from Saudi Arabia under a financial facility offered by that country to Pakistan.
NITROGEN SOLUTIONS
Eastern Cornbelt: UAN-32 was quoted at roughly $310-$315/st ($9.69-$9.84/unit) FOB regional terminals last week.
Western Cornbelt: UAN-32 pricing was also up from last report. Sources tagged the regional market at $310-$320/st ($9.69-$10.00/unit) FOB terminals for prompt tons, with reports of confirmed sales at the upper end of that range in Iowa. Reference levels were quoted as high as $330/st ($10.31/unit) FOB in the region last week.
Northern Plains: The UAN-28 market was referenced at $277.20/st ($9.90/unit) FOB in Minnesota and $285/st ($10.18/unit) DEL in North Dakota for cash sales to the dealer, with forward contract and/or spring prepay solutions tons reported as high as $10.06-$10.16/unit FOB in Minnesota.
Great Lakes: UAN was tagged at $9.75-$10.00/unit FOB in the region for cash tons, with delivered UAN-32 quoted at the $320/st ($10.00/unit) mark in central Wisconsin. UAN-32 spring prepay tons were reportedly on the table for $325/st ($10.16/unit) FOB in Wisconsin.
Northeast: UAN-30 was pegged at $257-$260/st ($8.57-$8.67/unit) FOB, with the upper end quoted to dealers FOB Philadelphia. The UAN-32 market out of terminals in upstate New York was referenced at the $320/st ($10.00/unit) mark before discounts.
AMMONIUM NITRATE
Western Cornbelt: Ammonium nitrate remained at $320-$325/st FOB, with the low FOB St. Joseph, Mo.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate was steady at $220-$240/st FOB in the region.
Western Cornbelt: Granular ammonium sulfate was unchanged at $220-$230/st FOB in the region; one Iowa source pegged the common dealer price at $225/st FOB, if you can find product.
Northern Plains: Granular ammonium sulfate pricing was also up from last report. The market was quoted at $225-$235/st DEL in North Dakota, and $230/st FOB in Minnesota.
Great Lakes: Granular ammonium sulfate was reported at $220-$230/st FOB in the region, with mid-grade quoted by Wisconsin sources at the $210/st FOB mark and allocated.
Northeast: Granular ammonium sulfate was quoted at $220-$225/st FOB in the region, with the low at Philadelphia and the upper end in New York and FOB E. Liverpool.
PHOSPHATES
Central Florida: Phosphate was flowing out of Central Florida last week. Central Florida was already the strongest of the major markets, but took a huge upswing last week after Mosaic announced it was raising its price by another $5/st FOB effective last Friday. Producers in Central Florida have sold so much that virtually all of the railcars from last week until the first of April were booked. The only thing still available was shipments of individual railcars, and those will be quickly evaporating. Mosaic was accepting orders as far forward as April, but those seeking delivery in March and April will be required to prepay. Traders, too, reported a sharp increase in sales last week, a sure sign the market is for real.
Meanwhile, inventories continued to shrink last week, and with the heavy shipping schedule that will continue into November, the effect of strong sales at higher and higher prices will keep prices up well into the spring season. That situation will continue for as long as grain prices, particularly corn and wheat, stay high. If grain prices should take a sudden drop, fertilizer sales, including phosphates, will come to a sudden stop.
Sulfur was still a problem last week, and will be for some time. Refineries along the Gulf Coast were not producing as much sulfur as had been anticipated, and shortages continued to threaten future phosphate production. Negotiations for fourth-quarter sulfur prices were just getting underway last week, and the expectation was phosphate producers will have to pay far up into the double digits to insure supply.
The Central Florida DAP price range actually became a range last week with sales between $385/st FOB and $390/st FOB, compared to the flat price of $385/st FOB, which had held for several weeks. Mosaic’s posted price moved up to $395/st FOB for DAP and $391/st FOB for MAP. CF’s price was $390/st FOB for both DAP and MAP, and PotashCorp’s Central Florida reference price moved to $390/st FOB.
In Texas, Agrifos’ truck price was $430/st FOB, and $415/st FOB for railcars, but was sold out through November for rail-delivered phosphates.
U.S. Gulf: As terminals begin to empty in the Midwest, reordering has begun in some areas. Within another week, reordering on a major scale will take off. Late last week the cheap barges that had been available began to disappear, while at the same time prompt barges from producers and large traders started selling at a premium price. By the end of this week, last week’s high price could well become this week’s low.
Normally at this time of year, warehouses along the Arkansas River are the busiest, but that hasn’t happened this time. The corn crop there was in the process of completing the harvest, and ground preparation for the wheat crop was just beginning. To avoid frost damage, farmers were waiting a few weeks longer to get the wheat in the ground. However, they could face another problem – getting seed. Sources said the genetically modified wheat seed preferred by farmers was in short supply, but regular wheat seed was plentiful. The genetically modified version resists pests and uses less nitrogen, which makes it a favorite. Farmers in other areas of the world, such as South America, were moving to the new wheat seed, and that could be one of the reasons for a shortage here.
As of last Friday, Mosaic moved its price for NOLA DAP barges up $10/st FOB to $415/st FOB, and others were likely to follow suit. The company will accept orders as far forward as April, but required buys for March and April to be prepaid. Naturally, there was a flurry of activity to lock in the $405/st FOB price, and that will have the effect of keeping the price of phosphates up – at least until the spring season starts.
The lowest priced NOLA DAP barge sale that could be confirmed last week was made at $398/st FOB, but traders and producers were making sales at much higher levels, $400-$405/st FOB. One said he pulled his remaining barges off the market after making a multitude of trades at the $405/st FOB price. With Mosaic kicking in its new price, the trader believed the remaining barges will bring a higher price this week. He’s probably right.
The Corps of Engineers was doing its dredging work north of Lock 17 on the Arkansas River, and barge traffic was moving, although a small backup had resulted. The situation should be close to normal by the end of this week.
The NOLA DAP barge price range moved up this week from $397-$400/st FOB, where it had lingered for several weeks, to $398-$405/st FOB. With Mosaic kicking up its asking price another $10/st FOB, the low this week will most likely be $405/st FOB, or very close to that number.
Eastern Cornbelt: DAP and MAP were quoted at $435-$438/st FOB river terminals last week, but a $10/st warehouse posting hike was reportedly on the books from Mosaic. 10-34-0 pricing was also on the rise, with most sources tagging the market last week at $365-$385/st FOB in the region, depending on time of delivery.
Western Cornbelt: DAP and MAP were pegged at $435-$445/st FOB, up slightly from last report, with the low out of river terminals and the upper numbers quoted to dealers out of inland warehouses in Nebraska. 10-34-0 pricing was up from last report as well, with continued reports of very tight inventories. The cash market was quoted at $375-$385/st FOB, with reports of spring prepay booked at the $392/st FOB number in Iowa.
Northern Plains: DAP was pegged at $440-$441/st FOB, with MAP at $435-$438/st FOB the warehouse. North Dakota sources quoted delivered MAP at the $457/st mark last week. 10-34-0 was quoted at $375-$385/st FOB, with the low end also quoted by North Dakota sources for delivered 10-34-0 from Canadian shipping points.
Agrium’s phosphoric acid prices for Minnesota and the Dakotas firmed on Oct. 1 to $705/st rail-DEL for merchant grade acid (MGA) and $715/st rail-DEL for super phosphoric acid (SPA). Postings for both products will increase by $10/st in November and again in December.
Great Lakes: DAP was pegged at $440-$448/st FOB in the region, with the upper end in Michigan. Several sources talked of an impending increase, with one supplier slated to move its warehouse prices in Michigan up $5/st Oct. 8 to $453/st for DAP and $449/st for MAP. No market was reported for TSP last week.
As for 10-34-0, sources pegged the regional market at $375-$385/st FOB, depending on location and time of delivery. One Wisconsin source reported the low end of the range for prompt tons and the upper end for spring prepay.
Northeast: DAP and MAP were quoted in a broad range at $437-$455/st FOB in the region last week, depending on location, with the upper end reported in New York. 10-34-0 reference pricing had reportedly firmed to $340/st FOB tank locations in upstate New York.
Western U.S.: Agrium’s MAP postings will firm on Oct. 12 to $460/st DEL in Montana; $465/st DEL in southern Idaho and Utah; $465/st FOB and $470/st DEL in Washington, Oregon, and northern Idaho; and $470/st FOB or rail-DEL in California and Arizona.
U.S. Export: PhosChem made a sale into Brazil last week at $443/mt FOB for 5,000 mt of DAP, and was working on other deals for that location at that and higher prices. The South American market looks promising for North American phosphate producers, because phosphate prices around the world have gone way up. At the same time, ocean freight rates have also skyrocketed, so producers in other countries were concentrating their efforts on nearby markets, such as Asia and Europe.
“Europe is on fire,” was a comment made by both a producer and a major trader last week. European farmers were expected to plant about 5 million additional acres this season – mostly wheat – and was scrounging for phosphates and other fertilizers. China and North Africa will be the most likely suppliers, but Tunisia was in the process of beginning a turnaround, which will take about 50,000 mt out of the European market.
India did not move on PhosChem’s offer to supply 100,000 mt of the 500,000 mt it sought in a recent tender. The country had been buying earlier at $495/mt DEL and PhosChem’s offer was for $515/mt FOB, which may have been beyond the reach of the Indians. Even if India decided to accept the deal, it has already lost its place in line. Nevertheless, India has already been putting out feelers for 2008 and will be very active next years.
The export DAP price range moved up last week to $440-$443/mt FOB from the previous week’s $430-$436/mt FOB. Prices this week will likely move up a few dollars.
POTASH
Eastern Cornbelt: Potash prices continued to firm, with inventories described as very tight and strictly allocated. Sources tagged the warehouse market last week at $295-$300/st FOB for any available tons, but availability remained the operative word. Mosaic was notifying its North American potash customers of price increases for all mine, warehouse, rail, and barge locations. The price increases vary by market and location, and will range from $28-$35/st. The new prices are effective immediately, although new sales are limited as Mosaic has already sold most of its available product for October or November shipment.
Western Cornbelt: The potash market continued its upward march last week. Although some warehouse postings from producers were at lower numbers, sources said actual sales of spot tons were taking place as high as $295-$310/st FOB regional warehouses, depending on grade, location, and availability. As for the lower postings, sources said tons were simply not available at those numbers.
Effective Oct. 1, Intrepid Potash’s muriate of potash postings FOB Carlsbad, N.M., moved to $234/st for 62 percent standard, $237/st for 60 percent granular and 62 percent fine standard, and $242/st for 62 percent granular. The company’s postings FOB Moab, Utah, moved on that date to $231/st for 60 percent standard and $237/st for 60 percent granular. Postings FOB Wendover, Utah, moved to $245/st for 60 percent standard and $251/st for 60 percent granular.
Kansas-based Great Salt Lakes Minerals, a subsidiary of Compass Minerals, announced on Oct. 3 that it will increase prices on sulfate of potash (SOP) specialty fertilizer products by $35/st on shipments to the U.S. and Canada beginning Dec. 1, and by $60/st on all international shipments effective immediately. The company is introducing the price increases to support investments needed to meet expanding demand.
Northern Plains: Potash pricing ideas were all over the board, but all agreed that product was very, very tight and the market is firming. Minnesota sources quoted the spot market for potash now at a firm $290/st FOB warehouses, provided spot tons are available. A North Dakota source reported the market at $246/st DEL based on a $219/st FOB Saskatchewan mine price, but said tons at that level are extremely limited if not completely sold out.
Postings from PCS Sales FOB Saskatchewan mines for the Oct. 1 to Nov. 30 shipping period include standard at $222/st, granular at $227/st, and soluble and white granular at $232/st. On Dec. 1, those reference prices are slated to move to $252/st FOB for standard, $257/st FOB for granular, and $262/st FOB for soluble and white granular.
As of Sept. 26, Agrium’s red premium potash postings in the region moved to $267/st rail-DEL in northern Minnesota, $269/st rail-DEL in southern Minnesota, and $285/st FOB Shakopee, Minn. The company’s posting FOB Vade, Sask., moved on that date to $240/st for red premium and $235/st for 60 percent standard grade potash.
Great Lakes: Potash was strictly allocated and in very tight supply. The regional warehouse market was quoted at $288-$295/st FOB last week, provided tons could be had. One Wisconsin source quoted truck-delivered potash firmly at the $295/st mark. As of Sept. 26, Agrium’s 60 percent red premium potash postings moved to $269/st rail-DEL in Wisconsin and Michigan, and $274/st FOB Toledo, Ohio, and Saginaw, Mich.
Northeast: Potash pricing was up significantly. Sources pegged the market at a firm $282-$287/st FOB for red granular potash, depending on location and provided spot tons could be had. Agrium’s Sept. 26 postings for 60 percent red premium potash include $277/st rail-DEL in Delaware, Maryland, New Jersey, New York, Pennsylvania, Virginia, and West Virginia; $280/st rail-DEL in Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island, and Vermont; $282/st FOB Lewistown, Pa.; and $285/st FOB E. Liverpool, Ohio.
Brazil: Belarusian Potash Co. (BPC), and JSC Uralkali have announced a US$40/mt price increase for potash shipped to Brazil starting on Nov. 1, which results in a price of US$345/mt for large scale importers and $355/mt for smaller ones. Earlier in August, the company increased the prices for the Brazilian customers by $25/mt for October shipments. However, negotiations with Brazilian buyers later in the month resulted in a number of contracts at a revised price that will take effect before the initially set dates.
Brazil is one of the fastest-growing markets worldwide. According to the International Fertilizer Association, MOP import volumes to the region have risen by 58 percent in the first half of 2007. Supplies to Brazil make up to 20 percent of the company’s exports, which makes the Brazilian market a strategic one for BPC. In January-August 2007, BPC’s sales to Brazil increased by 37.6 percent as compared to the same period in 2006.
SULFUR
Tampa: Refineries along the Gulf Coast have not lived up to expectation in terms of sulfur production, although the plants were running about the same as they normally do. That situation has exacerbated the continuing sulfur shortage in the U. S. and the world markets. However, the situation was making the precious waste material increasingly valuable. Sources said sulfur producers were planning to seek price hikes for the fourth quarter somewhere in the $30-$40/lt range. Even at those levels, it would still be a bargain, say sellers, compared to the price the material can bring on the world market, where prices are closer to $150/mt FOB.
Phosphate producers are selling everything they can make and at record high prices, so chances are they would be more willing than normal to settle – after putting up the customary fight.
In addition, the shortage has carried over to the sulfuric acid market for industrial customers, who are also facing extremely high prices and difficulty finding supplies.
The situation was expected to begin improving by early next year, but that may not be the case. Worldwide demand for phosphates continues to escalate, while sulfur supplies have not kept pace.
Vancouver: Buyers in Brazil, who had been paying among the lowest prices for sulfur under their old semester contracts, were said to have settled on new terms that will raise their price approximately $100/t FOB. That will bump up the price range for contract sulfur from Vancouver and make the previous top the new bottom. The new range jumped to $110-$150/t FOB. Quarterly contract negotiations with China were believed to be still underway.
Kazakhstan: Chevron has been fined by the government of Kazakhstan for environmental problems related to Chevron’s sulfur storage between 2003 and 2006. The company has since been getting rid of its excess sulfur by selling it, but it was not clear to whom or for how much. It was also appealing the fine.
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.
