FMB Weekly Ammonia Report – 19 February 2009 Week 07

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Ammonia Price Guide (US$ per tonne unless otherwise stated)

Another price spike this week Prices rose again this week, as Japanese traders secured new product out of South-east Asia and the Middle East. Mitsui has bought 15,000t from Qafco at $260pt fob for early-March loading and Mitsubishi has secured 15,000t from Mitco at $225pt fob. The prices are around $45-60pt higher than fob levels in Asia and the Middle East last week. Similarly, in the US, PotashCorp has agreed a sale of Tampa tonnes, most likely to CF Industries, at $275pt cfr, for 2H March delivery. This represents a $76pt rise from the existing benchmark price for Tampa. Market players now expect this to be the Tampa price set for March. The Tampa price in February rose by $74pt from January, so the possibility of a $76pt rise for March seems reasonable, particularly as the fob market is strengthening week by week. In Asia, demand appears to have improved slightly, particularly from Taiwan and Thailand. There are reports that caprolactam production is rising, partly due to lower ammonia costs in end-2008 and early this year. However, a steep rise in ammonia prices could wipe-out demand from caprolactam producers within a short period. Some traders are reporting enquiries from buyers who usually buy from other traders, suggesting there may be a shortage of product in some regions. In the Middle East in particular, there are reports that a number of major traders are looking to secure product, mainly for delivery East of Suez. In general, the freight market is giving quite low returns to ship-owners, but activity has started picking up with more spot enquiries. Charter deals are taking long periods to finalise currently, with buyers cautious about accepting higher prices. MARKET SUMMARY: FSU/EUROPE YUZHNY – Nitrochem has sold 25,000t to a trader at $215pt fob for early-March loading out of Yuzhny. The cargo will come from Togliatti. With fob prices still below production costs for most Ukrainian producers, the

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Ammonia – fob Ventspils Yuzhny North Africa Middle East US Gulf dom (p.s.t. bge) Caribbean

19 Feb

12 Feb

217-225 200-215 200-210 170-260 **150-160 159-235

217-225 200 200-210 **145-200 150-160 159

Ammonia – c+f 257-265 NW Eur (duty unpaid) 271-279 NW Europe (duty paid/d free) **250-260 North Africa *200-210 India **200-225 Far East (excl Taiwan) **200-225 Taiwan 199-275 Tampa 195-280 US Gulf * All formula / ** indicative / + old business NM No Market

257-265 271-279 **240-260 **192 **170-220 **190-220 199 195-200

All rights reserved. FMB Consultants accepts no liability for the content of this report, or for the consequences of any actions taken on the basis of the information provided. No company or individual may use the price information contained herein for commercial purposes without the express permission of the publisher. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means - electronic, mechanical, photocopying, recording or otherwise - without the prior written permission of the Copyright owner. ©2009 - FMB CONSULTANTS Ltd

Yuzhny line-up will be dominated by product from Togliatti and Rossosh for the coming weeks. The total line-up out of the port is still expected to be around 140,000t. Yuzhny line-up February: Vessel Kt Al-Majeedah 15,00 Nijinsky 15,00 Havlur 12,00 Brussels 23,50 Hekabe 35,00 Hesiod 40,00 Total 140.5 Estimated arrival date *

Shipper/Destination Yara Trammo/Greece+Israel Yara/Med Trammo/US Nitrochem/US Yara/US

Feb 11 17 *20 *20-25 *19 *26

Page 1 – FMB Weekly Ammonia Report 19 February 2009

FMB Sales Review - 19 February 2009 Product

Origin

Ammonia NA Qatar Malaysia Yuzhny Kuwait/UAE Russia Ventspils Russia Iran Iran Ventspils NA Saudi Arabia Saudi Arabia Qatar Qatar AG

Seller

Buyer

Destn

‘000t

$pt bulk

Shipmt

PCS Qafco Mitco Nitrochem Qatar Nitrochem NA Nitrochem IPCC IPCC Uralchem Mitsui Sabic Sabic Qafco Qafco NA

NA Mitsui Mitsubishi Various Koch Yara Trammo Trammo Yara Ameropa Trammo Yara Trammo Mitsubishi Yara Mitsui Trammo

Tampa NA Korea Europe/N Afr NA NA NA NA NA China NA China Turkey NA NA NA NA

15 15 15 70 25 15.4 40 20 25 20 Spot 5 23 23 23 Spot 23.5

275cfr Tampa 260fob 225fob 200 fob 200fob 200fob 217-222 fob 200 fob 189 fob 145 fob 210-215pt fob 240pt fob 123pt fob 125pt fob 120pt fob 130pt fob 125fob

2H Mar 1H Mar Early Mar Feb 2H February February February February February February January January January January January End Dec 1H January

VENTSPILS – Yara is loading two 4,000t cargoes from Venspils.

has purchased the ammonia to store in its tanks in the run-up to restarting its plant.

Ammonia fob Yuzhny

MOROCCO – Having restarted it’s DAP plant at Jorf Lasfar earlier this month, OCP is now understood to be negotiating ammonia cargoes with suppliers. The producer is reportedly in talks with Sabic for a March cargo.

1000 900

Yuzhny moves higher on limited product

800

ALGERIA – Two plants at Arzew are down, production at Anaba is running normally.

'000 tonnes

700 600 500 400

Ammonia - fob Middle East

300 200 4th Dec '0815th Jan '09 No Market

100 2008 F

M

A

M

J

J

A

S

O

N

D 2009 F

MIDDLE EAST/AFRICA QATAR – Qafco has sold 15,000t this week to Mitsui for loading in the first half of March, priced at $260pt fob.

US$ per tonne

0

1000 900 800 700 600 500 400 300 200 100 0

2006

Qafco’s 25,000t cargo sold to Koch at $200pt earlier this month will load on the Harriette N at the beginning of March. The cargo is likely to be destined for the US, although it is understood that Koch was originally expected to deliver the cargo to Europe. Qafco 3 is running again. The plant will enter a turnaround on 4 March for at least three weeks. IRAN – Yara’s Brugge Venture is currently waiting to load from IPCC. JORDAN – Qafco last week delivered a cargo for Aqaba on the al-Marona. While JPMC’s DAP plant is still understood to be down, it is thought that the producer

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Middle East price jumps $60 pt.

2007

2008

2009

INDIA The latest 5,000t shipment to Hindalco, Dahej on the Rose Gas, discharging 21-22 February has been priced at $210.65pt cfr with 65 days credit. The vessel will then discharge 12,000t at Sikka for GSFC, priced at $200pt cfr with 60 days credit. ETA at Sikka is 23-24 February. With Indian buyers having now agreed on phosacid prices of $760pt cfr for shipments up until 31 March, demand from Indian DAP producers for ammonia is expected to pick up in the next two weeks.

Page 2 – FMB Weekly Ammonia Report 19 February 2009

COMPANY NEWS Yara International has reported “satisfactory underlying results for fourth quarter 2008, with significant negative one-offs.” A statement from Yara said the results are weaker than last year due to lower sales volumes, writedowns on third-party sourced inventories and foreign exchange losses on debt. Full-year 2008 results are the best so far for Yara, according to the statement. “Yara reports a negative fourth-quarter net income after minority interest of NOK 2,109 million (negative NOK 7.27 per share), compared with a profit of NOK 2,044 million (NOK 7.01 per share) last year. Excluding net foreign exchange gains/losses and special items, the result was approximately NOK 0.10 negative per share compared with NOK 3.86 per share in fourth quarter 2007. Fourth-quarter operating income was NOK 408 million compared with NOK 1,494 million last year. EBITDA for the quarter was NOK 1,626 million compared with NOK 2,531 million in the fourth quarter last year. Yara's board will propose to the Annual General Meeting a dividend payment of NOK 4.50 per share for 2008.”

ASIA MALYASIA – Mitsubishi bought 15,000t from Mitco at a price of $225pt fob, for delivery to Korea. Mitsubishi is understood to have nominated either the Antwerpen or the Berlin Ekuator for the voyage, loading 11-17 March. INDONESIA – Mitsubishi’s KPI plant restarted on 13 February. Meanwhile, Mitsui’s KPA plant is running normally. CHINA – Ameropa’s Havrim, which sailed from Assaluyeh Iran last week, will discharge on 1 March.

US/CARRIBEAN TAMPA – PCS has sold 15,000t to an undisclosed buyer, most likely CF Industries, at $275pt cfr Tampa. The cargo will be delivered in 2H March. The price is $76pt higher than the Tampa benchmark price for February. OKLAHOMA- Terra Industries announced last Friday that it has resumed ammonia production at its Woodward facility in Oklahoma. The plant, which has been idle for nearly two months, "will operate at optimal rates to manage inventories in the continuing slow industrial ammonia demand environment," according to Terra. The upgrading plants will operate at full rates to meet agricultural nitrogen demand. TRINIDAD – The Solaro, which sailed from Trinidad at the beginning of this week and was destined for Europe may now be diverted back to the US. Yara is understood to be sold out of product from Trinidad until the end of April.

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"The fertilizer industry has since September experienced an unprecedented slow-down in deliveries and decline in international fertilizer prices. Despite challenging market conditions, we deliver a strong underlying performance excluding write-downs on third-party sourced inventories and currency effects on debt, demonstrating the strengths in Yara's flexible business model. We have taken action to mitigate the effects of the slow-down by reducing third-party sourcing and curtailing production, and we are benefiting from cheaper ammonia import," said Jørgen Ole Haslestad, President and CEO of Yara International ASA. "Farm economics should support strong fertilizer demand for the current season, and Yara is wellpositioned to benefit from such a recovery. Our flexible cost structure also protects us in the event of a further delayed recovery, should farmers choose not to apply optimum amounts of fertilizer this season. However, a drop in fertilizer application would negatively affect food production, thereby tightening grain markets further and requiring a stronger recovery in fertilizer demand next season", said Jørgen Ole Haslestad. The statement said that full-year net income after minority interest was NOK 8,228 million (NOK 28.27 per share), the best so far for Yara, compared with NOK 6,037 million (NOK 20.60 per share) for 2007. Excluding net foreign exchange gains/losses and special items, the result was NOK 36.28 per share compared with NOK 15.91 per share in 2007. Full-year operating income was NOK 12,281 million, compared with NOK 4,987 million last year. EBITDA was NOK 17,917 million compared with NOK 8,441 million last year. Meanwhile Yara says fourth-quarter fertilizer sales volumes decreased 43% from last year. Deliveries in all regions except North America were down, with the largest declines in Latin America and Asia. Inventories of third-party sourced products were written down by

Page 3 – FMB Weekly Ammonia Report 19 February 2009

NOK 1.7 billion to reflect lower market prices. Industrial segment deliveries declined due to lower sales to the European process chemical industry. The drop was partly offset by continued growth in environmental products and ammonium nitrate to the mining industry. The Upstream segment delivered strong results, as fertilizer prices were higher than last year despite a falling trend during the quarter, and the price improvement was only partly offset by increased energy and raw material costs compared with 2007. “Yara's first-half 2009 European energy cost is expected to be NOK 2.2 billion lower then last year. Going forward Yara will benefit from the acquisition of Saskferco in Canada effective 1 October 2008 and the 50/50 joint venture in Libya (Lifeco) established 9 February 2009. These initiatives increase the share of Yara's energy consumption outside Europe from 30% to 38%,” the statement concluded.

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