Christmas has arrived early this year for U.S. urea buyers thanks to the Euro crisis!!!

In the last two weeks, Green Markets reports urea price reductions over $65 per short ton f.o.b. NOLA while Profercy reports NOLA purchases at $375 per ton. The November NOLA average hovered at $470. That puts things in perspective.

What we are hearing is that the problems aren’t just the weak Euro depressing fertilizer (and grain) prices; the bigger worry is that the Euro will actually collapse as a currency. Any transaction caught in the middle if/when this occurs will likely not be paid, be paid very late, or at a steeply discounted rate in some other currency (eventually). Traders aren’t making deals because they are scared.

“A picture is worth a thousand words”, the old saying goes. Check the graph below.

Source: http://www.fertilizerworks.com/html/market/Profercy.pdf

Back in June, we passed along a market prognostication concluding with others that (1) world inventories of Urea would remain tight through December, (2) there would be no major build-up of producer inventory (product would be sold as it was produced), (3) any price reversals would be temporary, and (4) prices would continue to trend upwards.

We could be a little embarrassed, but this topsy-turvy world economy is mystifying to everyone including us. Is it the see-saw 1930’s all over again? We don’t know. One thing for sure – deficits and government debt are scaring the daylights out of everyone.

On the fertilizer supply side, U.S. and Canadian natural gas remains cheap keeping domestic manufacturing costs down, the fertilizer market is in its seasonal ebb as northern hemisphere markets shifts to the southern hemisphere. Imports are strong because Europe is weak(er).

On the demand side, Europe is sitting on held-over urea inventory from last season, Indian purchases are soft, speculators are trying to unload long positions, and U.S. buyers are wondering how low pricing can go before winter-fill to replenish warehouses for spring.

So this is the market snapshot in December – a far cry from six months ago.

From all of us at Cervantes-Delgado, Inc. (CDI), we wish all of you a very Merry Christmas and a Safe and Prosperous New Year!

Wakefield opens Canada’s first DEF solutionizing facility for H2Blu

TORONTO — Wakefield Canada today opened its H2Blu diesel exhaust fluid (DEF) solutionizing facility in Toronto. Today’s ribbon cutting ceremony took place well ahead of the original business timetable. The plan called for building a facility eventually when H2Blu volume warranted the step; the strength of sales in the first six months have already justified the investment.

Wakefield Canada has been marketing its own brand of DEF, H2Blu, for less than half a year and its market success has already accelerated the company’s plans for Canadian production. Bob MacDonald, President of Wakefield Canada, today cut the ribbon officially opening the high tech facility that will take prilled urea, the raw ingredient in DEF, and process it into ready-to-use H2Blu DEF. The solutionizing facility is housed within Wakefield’s existing lubricant blending plant in Toronto’s Long Branch area. The facility is understood to be the first of its kind in this country. Wakefield sources prill through CDI (Cervantes-Delgado Inc), a strategic partner of PotashCorp.

By manufacturing and packaging H2Blu in its own facility, Wakefield is able to absolutely control the product’s purity. Purity is critical to the operation of today’s SCR (Selective Catalytic Reduction) clean diesel vehicles; impurities can cause engines to operate improperly, slow down (derate) or even stop.

In addition to the manufacturing equipment, Wakefield has also increased its distribution fleet adding the specialized trucks required for distribution of sensitive DEF. MacDonald noted that the investment in the new facility and trucks is significant for the company but helps strengthen Wakefield’s commitment to manufacturing and distributing vital products to the automotive and heavy-duty sectors. The company’s strong relationships within the HD and automotive industry, built on the strength of its Castrol lubricants representation, will create synergies that MacDonald anticipates will propel the company into a leadership position in the DEF segment.

Macdonald was pleased to announce that production of H2Blu also brings jobs and economic benefit to the community and the country, fulfilling another of Wakefield Canada’s business objectives.

Background on Diesel Exhaust Fluid

Effective January 2010, the Canadian and U.S. EPA legislated new diesel emission standards for all on-road trucks and buses in North America. These standards have greatly limited the allowable NOx (Oxides of Nitrogen or Nitrogen Oxides) levels, to be emitted from diesel vehicles – trucks of all classes, passenger cars, and buses. These requirements demand that all new road vehicles with diesel engines, from 2010 on, have engines with technology that will ensure the emission standards are met.

Most diesel engine manufacturers have focused on Selective Catalytic Reduction (SCR) technology to reduce the oxides of nitrogen (NOx) from diesel exhaust. SCR uses Diesel Exhaust Fluid (DEF) and a catalytic converter to achieve the allowable standards.

DEF is defined as AUS 32 (Aqueous Urea Solution 32%) made from 32.5% high purity urea and 67.5% de-ionized water. DEF is easily compromised in terms of quality therefore extreme care must be taken in handling and storing to ensure it does not get contaminated. Impurities will cause the fluid not to work properly; even one teaspoon of salt can contaminate a 20,000 L tanker full of DEF – or can cause damage to the SCR catalyst, causing engine problems to the point of reduced engine performance or possibly nullifying engine warranties.

About Wakefield Canada Inc.

Wakefield Canada Inc., a wholly Canadian owned company, markets, distributes and manufactures category-leading products for the automotive and heavy-duty vehicle marketplace. In July, the company celebrated its sixth anniversary as exclusive Canadian marketer of Castrol lubricants. With coast-to-coast distribution and warehousing Wakefield is uniquely able to supply this essential product in an effective and timely manner.

Over its comparatively brief history, the company has received many honours and designations: ISO 9001 for overall Wakefield operations, and ISO 14001 for manufacturing operations; 2009 and 2010 Canada’s 50 Best Managed Companies (Best Managed) Award; and three times (2009, 2010 and 2011) named among the Top 50 Best Small and Medium Employers in Canada. Wakefield has received official validation of carbon neutrality for 2008 and 2009 and is committed to maintaining this approach in all business operations in future.

From time to time, CDI sends out market assessments when we see odd, perturbing, or disturbing events occurring in the urea market place.  Now is such a time.  Urea prices have skyrocketed over the past two months, an event which not only has shocked us but also the rest of the industry.  Initial causes were flooding, closures throughout the Mississippi River, plant outages, rebuilding of low inventory stocks, the forward strength of the grain markets and speculation here in the U.S.

Over the last week, however, an additional and more serious event has occurred which has world wide implications.  China is normally a big exporter of urea especially during the second half of the year.  There is now a growing realization that China will not be the big export player that it was last year due to a tougher export tax policy.  Consequently, there is now a scramble worldwide for product from other origins. For the U.S., what had been a temporary shortage due to natural disasters here at home has now become a world shortage for everyone.

The net result has been a dramatic increase in prices.  The U.S. Gulf has seen a run up in prices of $45-$50 per ton in just the last week over and above the price jumps of the last month.  A $50 per ton increase in dry urea translates to the following for:

32.5% Urea Solution =  $0.1136 per gallon

40% Urea Solution    =  $0.1174 per gallon

50% Urea Solution    =  $0.1191 per gallon

Prognosticators such as Green Markets and Profercy are now forecasting (1) that world inventories of Urea will remain tight, especially July through December, (2) there will be no major build-up of producer inventory – product will be sold as it is produced, (3) any price reversals will be temporary, and (4) prices will continue to trend upwards.

The general conclusion is that there appears to be no mitigating circumstances that could reverse these price trends, at least over the short term. 

UREA PRICE TRENDS

Cervantes-Delgado, Inc. (CDI), the largest privately held U.S. manufacturer and distributor of high purity Urea Solutions for mobile and stationary NOx control systems, is pleased to announce the completion of its full-service supply terminal in New Jersey.

With previous capability to transload bulk urea liquor only, new additions to the physical plant were designed by staff engineers, Alberto Delgado and Donald Moerdyke to receive dry or liquid feedstock urea by rail and truck for conversion to urea solutions of various concentrations for both SCR and SNCR systems.

At the commencement of operations, Luis Cervantes, President and CEO, stated, “The New Jersey terminal is strategically placed to augment our full service terminals in Baltimore, MD, and Albany, NY.  We now have tight and efficient supply chain from Washington D.C. to upstate New York with supply redundancy as insurance for our customers that they will never run out of product.”

Alberto Delgado agrees stating, “With over thirty terminals, our customers are covered and we will add more terminals as the market requires.”