News of the Week
FERTILIZERS FALTER, ADD TO ECONOMIC WOES After giving many U.S. chemical companies a welcome counterthrust in the 1980 recession, much of the fertilizer business unhappily is adding to the economic pause currently restraining the industry's new expansion. Except in the nitrogen fertilizer group, the outlook has flip-flopped from buoyant to cautious. A combination of negative factors promises fertilizers a more difficult time in the current fertilizer year started in July: • U.S. demand is mildly up for ammonia and well up for urea in the nitrogen group but has gone soft in the leading type of potash and fallen badly in phosphates. • Export demand, a big shot in the arm for the business in the past few years, also has weakened generally in recent months, dashing earlier hopes of a big contract expansion this summer. • Many product prices have dropped, even though prices in the raw material chain have continued to rise, causing a profits squeeze. • Continued plant expansion in the phosphates chain has only added to the slack. • Fat U.S. crop yields this year
Only nitrogen fertilizer output is higher than a year ago July-August 1981 change from 1980 ProducU.S. tion use
Per cent
Nitrogen products 3% Ammonia 0 2 Solutions Ammonium 16 nitrate, solid Urea, solid 10 Phosphate rock 15 Processed -19 phosphates Phosphoric -15 acid (P 2 0 5 ) 1 Concentrated superphosphate, all forms Diammonium -24 phosphate Potash products -1 Standard 15 muriate -3% ALL PRODUCTS
9% 2 34 -6
August 1981 change from August 1980 Ending inventory
-6% -8 -16 30
32 -13 -5
6 31 28
-6
0
-9
34
-7
31
1
-3 5%
95 100 7%
Source: Tyson Belzer & Associates for the Fertilizer Institute; potash data from the Potash & Phosphate Institute
6
C&ENOct. 12, 1981
after an excellent growing season warn of weak farm prices and possible slackening in fertilizer ordering. The Fertilizer Institute's wrapup on the first two months of the new fertilizer year has some arresting figures. For the phosphates, production was down 31% in August from a year ago and down 18% for July and August combined. U.S. use also was down 5% in the two-month comparison, boosting inventories 28% by the end of August. Within the phosphates group, important diammonium phosphate suffered a 24% production drop in July and August, while U.S. use fell 7% and inventories rose 31%. The DAP price has fallen more than 20% over the past year. Even the precursor wet-process phosphoric acid, a strong market item in the past few years, fell 15% in output and 6% in use in July and August. On the Gulf Coast, industry sources say many phosphoric acid plants were taken down for maintenance this summer, recouping some advantage from the demand slowdown after high operating rates in the past two years. In potash, the dominant standard muriate grade enjoyed a 15% production gain in July and August from a year ago. Unfortunately, use fell 5%, and inventories soared 100%. One potash company analyst estimates that U.S. mine capacity use in potash declined to 76% this summer from 86% last winter (see page 12). Only the nitrogen group shows some steadiness. Ammonia production in July and August was even with a year ago; use went up 2% and inventories eased 8%. And durable urea (solid) moved up 10% in production from an already high level of a year ago. Urea use rose 32%. Hopes were high for a spate of new export contracts this summer in downstream phosphate products, but the Fertilizer Institute says that exports of all phosphates in July and August decreased from last year excepting phosphoric acid. With phosphoric acid, there is a one-time influence this year from resumption of Hooker Chemical's large exports to the Soviet Union. This deal caused a 49% increase in overall phosphoric acid exports over the two months. Big fertilizer producer Interna-
tional Minerals & Chemical warned last month that its earnings in the first fiscal half ending in December will decline from a year ago. Besides the effects of the stronger dollar and high interest rates, company chairman Richard A. Lenon blamed adverse conditions in phosphates combined with "repeated and unwarranted increases in the price of sulfur, a major ingredient in phosphate fertilizers." IMC complaints on the sulfur price are a signal of new price resistance from big customers. Although sulfur and, until this year, phosphoric acid, have thrived with big price increases despite growing weakness in phosphates, they may not evade the change downstream much longer. Although the Fertilizer Institute still voices "confidence in the fall and upcoming spring cropping seasons," Wall Street has decided otherwise. Fertilizer-heavy companies such as IMC, First Mississippi, and Williams Cos. are trading close to their lows for the past year, after magnifying the general stock market drop with respective declines of 53%, 57%, and 55% from their recent highs. D
Celanese plans to quit textured polyester yarn The long list of U.S. polyester fiber capacity shutdowns since the mid1970's is continuing to grow. Celanese last week disclosed that it will halt production and sale of textured polyester yarn by the end of 1982. The facilities involved are at Shelby, N.C., and Greenville, S.C., and are operated by Fiber Industries, which is 62.5% owned by Celanese. (The remainder is held by Imperial Chemical Industries.) The shutdown will leave Akzona as the only other major polyester fiber producer that texturizes its own yarn. Celanese says that the withdrawal will be implemented in phases and is part of a plan to improve the longterm profitability of the polyester textile filament business. The company expects no significant impact on its 1981 income as a result of the closing. A positive impact is expected in 1982. For the short term, the move by
