US Mosaic taking measured approach to phosphate curtailment

HOUSTON (ICIS)–In the first comments on its recent decision to cut production of phosphate, US fertilizer producer Mosaic said on Thursday it was taking a measured approach to curtailing output and overcoming pricing escalation in the ammonia market.

Speaking during the company’s quarterly earnings conference call, Mosaic said the price levels of ammonia, which have risen from $520/tonne CFR (cost and freight) in August to $655/CFR tonne for the November Tampa benchmark contract, made it difficult to achieve desired margins.

The uptick in ammonia has put more pressure on the market, which was already feeling constricted with the onset of the seasonal decrease in demand and the slow progress on harvesting now cutting the amount of time left to apply nutrients before winter arrives in a large portion of the crop regions.

On 30 September Mosaic announced it was curtailing phosphate production due to high sulphur and ammonia prices, which it said would lead to lower operating rates at the producer’s mines and concentrates plants, but it would not cause a reduction in its workforce.

The producer said it was going to focus on margins and limit inventory build-up during what is traditionally the low end of the year.

During the call Mosaic CFO Richard Mack said the current results in the phosphate segment were within expectations and that while the company was encouraged it also recognized the market conditions were looking less favourable for the short term. He did emphasise that customer needs will be covered during this reduction.

“We believe that raw material prices particularly for ammonia continue to be out of line with the price levels and other agricultural commodities, which is why we decided to curtail some phosphate production during the fourth quarter. This disconnect is compounded by the fact that we are entering a seasonally slow period for phosphate sales,” said Mack.

“For clarity, we are going to take a measured approach to the curtailment. We will produce enough fertilizer to meet customer needs and we do not plan on curtailing our micro essentials production. We will evaluate our production levels daily with the objective of entering the spring application season with minimal high-cost ammonia in finished product inventory.”