re: just keeps coming..1
Price of phosphate going up...
http://www.theledger.com/apps/pbcs.dll/article?AID=/20050814/NEWS/508140337/1178 Published Sunday, August 14, 2005 Closings Lead to Speculation China-based company silent on Fort Meade, Bartow plant shutdowns.
By Kevin Bouffard The Ledger
FORT MEADE -- What began in 1994 as a sweetheart deal for U.S. Agri-Chemicals became a fatal divorce this year.
The Chinese-owned company will shut down its phosphoric acid plant in Fort Meade and its phosphate fertilizer manufacturing plant in Bartow by the end of the year, according to Monday's statement from the Mosaic Co. The shutdown stems from Agri-Chem's agreement to immediate termination of its phosphate rock supply contract with the Mosaic.
The agreement was AgriChem's sole source of the phosphate rock. Under the contract, Mosaic supplied 2 million tons of rock annually, which AgriChem turned into about 1 million tons diammonium phosphate, or DAP, fertilizer at the Bartow plant.
Agri-Chem officials declined The Ledger's interview request, but several phosphate industry veterans were willing to discuss the likely factors behind the termination agreement.
One reason Sinochem Corp, Agri-Chem's parent company, agreed to the deal was likely the $132 million premium Mosaic was willing to pay to terminate the contract before the scheduled Oct. 1, 2007, expiration.
"I think Mosaic definitely paid a premium for terminating the contract early," said Dick McFarlin, who managed the Agri-Chem operations for 25 years until 1987, two years before Sinochem purchased the company. He served as the executive director of the Florida Institute of Phosphate Research from 1988 to 1996.
A.L. "Judge" Holmes, the retired head of phosphate operations for C.F. Industries Inc., and Mike Lloyd, a 50-year industry veteran now with the phosphate institute, agreed Mosaic paid a premium.
Mosaic was willing to pay a premium because it wants the two million tons of rock for its own four fertilizer plants in Polk County, the three executives said. It can afford to do so because DAP fertilizer, the world's most widely sold phosphate product, is selling for a historically high price of about $230 per metric ton, up about 30 percent from a year ago.
"Mosaic did not want to deliver the rock," Holmes said.
In today's market, the contract terms favored Agri-Chem, he added.
Gray Gordon, a Mosaic spokesman, agreed Agri-Chem got very favorable terms under the contract because IMC Global Inc., which made the original 1994 deal, needed cash to help it pass through "financial straits." Mosaic inherited the contract when it was formed in October through a merger involving IMC.
"It goes without saying that, if the contract was beneficial to Mosaic, we would have kept it," Gordon said.
The development of China's domestic phosphate industry since the 1989 Sinochem purchase may have made the AgriChem asset less valuable today, Holmes and McFarlin said.
In 1989, China mined 15 million metric tons of phosphate rock, according to the U.S. Geological Survey. That doubled by 2004.
Agri-Chem may have also seen an opportunity to cut its losses from cost overruns from building a new gypsum stack at the Fort Meade plant, Holmes said. Another former industry official told The Ledger an Agri-Chem source had said the gypstack was running $10 million over budget.
Sinochem officials also may have decided it had gotten all it could out of the Florida phosphate industry, the veterans said. It also has oil, chemical and other global investments.
"They may have decided this is a dead-end business and wanted to get out," Lloyd said.
ARU Price at posting:
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