International Fertilizer and Agriculture News - August 31

US Phosphate Market Surprised by OCP and CHS Project

Several participants in the US phosphate market were surprised this week by news that Moroccan phosphate producer OCP and domestic agribusiness CHS will cooperate to build the first phosphate fertilizer production plant in the United States in more than 40 years. On August 26, OCP and CHS announced plans to build a phosphate fertilizer plant in Waggaman, Louisiana, with capacity of approximately 1.3 million tonnes per year.

The announcement surprised both domestic and international markets because OCP is currently subject to a review of countervailing duties on its phosphate fertilizer imports into the United States. The US Department of Commerce imposed these duties in 2021 after US producer Mosaic alleged that OCP's phosphate imports had materially injured the US market. In late June, President Donald Trump said he would temporarily suspend countervailing duties on certain Moroccan phosphate imports until early 2027 to address fertilizer supply concerns for domestic farmers. In late July, the Department of Commerce recommended retaining the duties because OCP's phosphate production continues to receive government subsidies.

The International Trade Commission is now considering whether removal of the duties would again materially injure the US phosphate industry. According to a Federal Register notice, an ITC ruling is expected soon, as the final result of the duty review is expected around October 28, 240 days after the start of the review.

Market discussion intensified because, one day before the OCP-CHS project announcement, Mosaic announced job cuts at part of its Uncle Sam and Faustina plants in Louisiana. Continued sulfur supply shortages have constrained phosphate operations. Mosaic said it has been monitoring the sulfur supply shock and taking cost-control measures. Its statement said phosphate production at the Uncle Sam and Faustina plants has stalled and may remain halted for more than six months, although ammonia production at Faustina will continue without interruption.

Following the OCP-CHS announcement and Mosaic's job cuts, many market participants expressed confusion over recent US government actions. One trader said: “It does not make much sense to build a new fertilizer plant when the fertilizer plant next door may be closing.” The trader added: “Why does the US government not directly subsidize Mosaic's operations instead of subsidizing another government?”

Other traders also expressed uncertainty over the project, saying the USD 450 million budget appears difficult to believe when other producers may need to incur significant production operating and maintenance costs. OCP's plan to ship phosphoric acid rather than phosphate rock to the Waggaman plant also drew attention. It avoids the need for the plant owner to manage gypsum storage in the United States, but exposes operations to higher freight costs.

The US government has recently emphasized strengthening domestic fertilizer production, and the US Department of Agriculture attended the OCP-CHS project launch. CHS has applied for the USDA's Fertilizer Production Expansion Program for long-term domestic supply. The application period recently closed, meaning the joint venture and other projects may soon receive federal funding support.

Thursday Traffic Through Hormuz Stable From the Previous Day

Commercial vessel traffic through the Strait of Hormuz remained limited on Thursday, despite US officials claiming that the waterway is open to commercial shipping and free of mines. According to maritime security company Windward, 12 vessels transited the Strait of Hormuz on August 27, unchanged from the previous day. Inbound and outbound traffic was evenly split, including four tankers entering through Iran's northern channel, three outbound tankers using the southern channel, and one outbound tanker using the northern channel.

This places commercial traffic through the waterway at slightly below 10% of normal volumes before the US-Israeli attack on Iran on February 28, which prompted Iran to announce the closure of the Strait.

US Central Command commander General Brad Cooper said in a video on the evening of August 27 that the internationally recognized central channel in the Strait had been cleared of Iranian mines and that “international shipping lanes are now open and momentum is building.” Windward did not identify any vessels using the central channel that day. Since the outbreak of the US-Iran war, traffic has largely split between the southern and northern channels.

Before the war, vessels used the central route under the established Traffic Separation Scheme, or TSS. Proposed by Oman and Iran and adopted by the International Maritime Organization in 1968, the TSS defines navigation lanes to reduce collisions and improve maritime safety. After the outbreak of the US-Iran war, Iranian forces reportedly laid mines in the central TSS channel, making passage through these lanes highly dangerous.

Joshua Tallis, director of the research program at the Center for Naval Analyses, said that several factors may make vessels transiting the center of the Strait easier to target than those travelling closer to the coast. These include a more complex sensor environment near shore and proximity to missile defense systems.

US officials continued to reinforce their claim that substantial oil volumes are moving through the waterway under US support. Cooper said US forces had assisted nearly 1,500 commercial vessels through the Strait, providing coordinated protection, and that 750 million barrels of crude had been transported to global markets in recent months. Vortexa data show average crude flows of 700 million barrels during the three months before the outbreak of war.

US Treasury Secretary Scott Bessent echoed other US officials in a social media post on Thursday evening, saying that the United States had guided 130 million barrels out of the Strait of Hormuz over the previous 14 days. This equates to approximately 9.3 million b/d, consistent with other US officials' claims of 9-10 million b/d, but well above the 3.5-3.7 million b/d average that satellite imagery and vessel-tracking information can confirm.