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The quest to escape the commodity cycle

Summary

Optimism must remain a key ingredient in the psychology of a Western European fertilizer industry manager, as the regional sector continues to seek strategies for improved profitability. The desire above all is to neutralise the worst effects of being in a commodity market, with all its inherent extreme fluctuations in prices and expectations. Mark Evans, Editor, assesses the factors that account for the current plight of the Western European fertilizer industry.

Abstract

"Plus c;:a change, plus c'est la meme chose." The international fertilizer industry is, like all commodity markets, highly cyclical, and the period from peak to trough and back to peak typically averages five years. This has been the fertilizer cycle for over 30 years at least, so fertilizer traders should in theory be able to anticipate the rise and fall of the market and adapt their tactics accordingly. If only life were that simple...

What factors lie behind the ebb and flow of market prices? What influences market confidence and the relative bargaining strength of buyers and sellers at any given time? At one level, fertilizer markets by definition obey a fundamental law of economics: the relative balance of supply and demand exert a gravitational pull on market prices and on expectations - a crucial factor - of the future movement of prices.

We can see this influence in the most recent gyrations in the international market for both nitrogen and phosphate fertilizers. The downturn in 1999 in nitrogen fertilizer prices was attributed mainly to the impact of new production capacity that was due to come on stream in the Middle East, the Caribbean and Latin America. Nitrogen fertilizer projects typically have a gestation period of at least five years. They receive approval when prices are buoyant, but by the time the project goes out to tender, the finance is raised, the technology chosen, contracts for construction are awarded, the complex is constructed, and trial production is satisfactorily completed, when the product is finally ready for sale on the world market, prices are very different from those assumed in the original financial evaluation. Worldscale projects of over 1 million tla capacity are increasingly the norm in the nitrogen sector, so each individual project can now have a significant impact on overall market expectations.

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A continuing capacity to surpr•ise

Summary

John Van Brunt, President and CEO ofAgrium, Inc. made the keynote address at this year's Fertilizer Industry Round Table. He is well known for being one of the most visionary leaders in the fertilizer industry today. His reflections on the issues facing the North American fertilizer industry in the context of rising energy prices and shifting regional trade balances are bound to be of interest to a wide audience.

Abstract

The fertilizer market is a typical commodity business, with lots of surprises in the domestic and world markets to keep things interesting. Some of the recent changes in the nitrogen and phosphate markets are just a continuation of that fact of life.

Some recent examples of these surprises include:

  • The 20% fall in Central Florida DAP prices (equivalent to more than $30/s.ton) in less than five months. This after three years of not changing by more than 5%.
  • Two years ago, who would have bet that Russia's largest phosphate producer would be jointly marketing phosphates with PhosChem into Asia and Latin America?
  • Similarly, who would have thought that the Russian potash producer Uralkali would be in a marketing arrangement with Canpotex, the Canadian offshore potash export agency?

Nitrogen price volatility has also been very high over the past five years. For example, US Gulf prices reached $184/s.ton f.o.b. inJuly 1996, only to hit a low of $84/s.ton in July 1999. Twelve months later, they were back up to $156/s. ton. Asimilar price pattern existed for ammonia and most other nitrogen products. This recent large increase in nitrogen prices would have been cause for celebration among the leading suppliers but for the fact that gas prices are more than double what they were last year.

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Ipswich makes waves in the east

Summary

The eastern UK Port of Ipswich is thriving, and fertilizers are playing a major role in its new prosperity. One year ago, lAWS Fertilisers (UK) opened a dedicated bagging and distribution centre, further cementing the partnership between it and the port operator, Associated British Ports (ABP).

Abstract

The opening last November of lAWS' latest UKfertilizer blending and distribution centre put the East Anglian Port of Ipswich firmly on the fertilizer map. The new terminal has furthermore cemented the partnership between two dynamic and expansion- minded organisations, lAWS Fertilisers (UK) Ltd. and the operators of the Port of Ipswich, Associated British Ports (ABP).

lAWS opened its new fertilizer terminal at Cliff Quay on 25 November 1999 and commissioned the new blending and bagging plant at the site on 1 December. This latest lAWS blending facility brings up to six the blending and distribution centres the company operates at British ports. The Ipswich blending unit operates at a maximum capacity of 200 t/h, and the blends supplement ammonium nitrate and urea bagged by lAWS at Ipswich to supply central and southern areas of England.

lAWS' first foray into the UK was in the late 1980s, when the Irish company acquired the activities of Sherriff& Sons. The subsequent purchases ofIndependent Fertilisers (Solent), with operations at Southampton and Plymouth, the fertilizer businesses of John Parsons in Scunthorpe, and Pertwee in Kings Lynn and Malton, North Yorkshire further raised lAWS' profile in the UK. Today, lAWS is the largest manufacturer of blended fertilizers in Ireland and the UK. These acquisitions have been supplemented by new, purpose-built terminals, and the lAWS distribution centre at the ABP-operated Port of Newport represented a major advance when it came on stream in 1996. This terminal serves South and West Wales and parts of the west country of England.

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Increased emphasis on quality

Summary

Two of our recent articles covered screening and crushingt, steps necessary for tight granular product sizing and improved product quality. In line with current efforts by producers to make hard,dust-free, and free-flowing fertilizers, the cooling of granular products has received added attention. David Leyshon+ examines the current state of technology for cooling granular fertilizers.

Abstract

Many granular plants were originally built with little or no cooling prior to storage and many plants have far exceeded the original cooling capacity. These plants are candidates for cooling revamps.

Cooling stabilises DAP, MAP and NPK products. Probably the most onerous aspect of storing hot product is the migration of residual moisture to the surface of the storage pile where this moisture condenses as it cools on the surface. This produces crusting, agglomeration and dusting when the lumps are crushed and softening of the granules in the top portion of the storage pile.

Cooling stabilises DAP, MAP and NPK products. Probably the most onerous aspect of storing hot product is the migration of residual moisture to the surface of the storage pile where this moisture condenses as it cools on the surface. This produces crusting, agglomeration and dusting when the lumps are crushed and softening of the granules in the top portion of the storage pile.

The original TVA recommendation, still espoused in the mid 1980s, was for cooling NPK, MAP and DAP products to 71°C (160°F) prior to storage. The current objective, especially for DAP, is more like 49°C (120°F) and often chilled air is being used to achieve this level.

Cooling granular TSP is a more controversial issue. Granular TSP is a product which is not completely finished when it exits the dryer. Particularly with Florida rock, curing goes on during storage to an ever-diminishing extent, even up to three weeks or more. During this period, the product may increase in available P20 5 (APA) by up to 0.5%. Some producers are said to count on this to make their guaranteed product grade. However, some TSP plants do cool, especially if their rock is reactive.

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SOP for high quality and value

Summary

Dr Marcus Ross* of Kali und Salz discusses the benefits of potassium sulphate use and outlines the role of SOP-INFO - launched by the Potassium Sulphate Information Board in 1998- in meeting future challenges in modern crop production

Abstract

Potassium sulphate's (SOP) properties and beneficial effects in soil and plants makes it one of the world's most important speciality potash fertilizers. Its two essential nutrients, potassium and sulphur, form a 100% nutrient carrier in one single fertilizer and are an ideal combination for modern nutrient management systems.

Potassium and sulphur fulfil a large number of physiological functions as macronutrients in the metabolism of the plant. With the desire for increased yield and higher quality by the consumers, SOP has become the preferred K source.

The combined high potassium (5052%) and sulphur content (18%) guarantees an optimum supply of these nutrients in soils low in potassium and sulphur, or in crops having a high additional sulphur requirement. Fine, standard or granular SOP fertilizer grades are perfectly suited for mechanised spreading, bulk blending or straight application. Special grades ofhighly concentrated crystalline SOP for liquid formulations, foliar application and fertigation systems complete the product range offered.

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Rubber linings for long life

Summary

Since 1974 various rubber-lined evaporators, crystallisers, digesters, storage tanks and other equipment with Vulcoferran rubber materials have been used for the production of phosphoric acid up to temperatures of 100°C. Gerd Meier* of HAW linings, Germany argues that the right selection of rubber material and bonding technology as well as the selection of professional application determines the lifetime of rubber linings.

Abstract

Some of the major projects HAW linings has been involved in are:

  • Maroc Phosphore I and II, at Safi, Morocco for OCP.
  • Jordan Phosphate Mines Company at Aqaba, Jordan, original plant and rehabilitation.
  • Philippine Phosphate Fertilizer Company at Leyte, in the Philippines.
  • BAGFAS at Bandirma, Turkey. Revamping and upgrading ofthe existing plant.

All ofHAW Linings' Vulcoferran rubber materials and their adhesive systems have been developed in the HAW laboratories and are exclusively produced in the HAW-rubber production workshop under strict quality control according to DIN EN ISO 9001.

The Vulcoferran rubber materials are produced in extruded sheets and are unvulcanised during application. The adhesive system is based on the same polymer as the corresponding Vulcoferran rubber material. Both the rubber materials and the adhesive systems, do not contain any chloroprene. The vulcanisation after application leads to an excellent bonding between the rubber sheets and the steel substrate. The bonding is temperature stable at up to 100°e.

The temperature stability ofthe bonding system minimises the risk of permeation, which in combination with the excellent physical properties of the proposed Vulcoferran rubber materials, will result in a long-life expectancy of the HAW rubber linings.

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