Head of Russian Fertilizer Producers Association Discusses Annual Results

Dear colleagues,

The end of December is a time for looking back over the year. This past year has been one of high volatility as well as rapid and profound changes in the economy and politics. Numerous rounds of sanctions, breakdowns in supply chains and the de facto “cancellation” of free trade have caused unprecedented damage in terms of global food security.

The “rift” in the global fertilizer market, as António Guterres described the situation, has been the key factor in the destabilisation. Western sanctions have disrupted supply chains from Russia and Belarus, which accounted for nearly a quarter of global trade last year:

• International container lines have completely left the Russian market;

• Shipping companies are refusing to provide vessels to transport fertilizers;

• Insurers are refusing to insure shipping operations;

• Payments are complicated by time-consuming compliance procedures at Western banks;

• Russian companies have seen a significant increase in logistics costs;

• Restrictions on the supply of technologies and equipment to Russia have created the threat an of artificial slowdown in investment-driven development of the mineral fertilizer industry.

Given the sharp decline in fertilizer usage in a number of regions around the world – by 20%–30% from the previous year – the ongoing crisis in terms of food prices is threatening to develop into a global food disaster next year.

In Europe, we are already seeing a marked decline in fertilizer consumption. Especially when it comes to phosphate-based and potash fertilizers, deliveries have decreased by 30%–33% from last year. It is very difficult for Europeans to replace these types of fertilizers:

• Russian supplies of potash to Europe decreased by 1.2 million tonnes, to 0.7 million tonnes (and regular shipments prior to the imposition of sanctions were responsible for most of this);

• Supplies of phosphate-based fertilizers decreased by 33% to 2.0 million tonnes, half of which was supplied before sanctions were imposed;

• As for nitrogen-based fertilizers, European farmers have been forced to reduce domestic production due to record natural gas prices.

EU countries, faced with a shortage of environmentally friendly Russian products as a result of their own sanctions, are talking about lifting restrictions on levels of toxic cadmium in mineral fertilizers. And this when they just came into force quite recently – last July. This will flood the European market with fertilizers with high concentrations of hazardous substances. An unprecedented blow to the health of their own people for the sake of a temporary situation. Sow the wind, reap the whirlwind.

As a result of Western sanctions, Russia’s exports of mineral fertilizers decreased by 15% in 2022, according to expert estimates. That said, back in the summer we were estimating a 20% reduction in exports. This shows that, starting in June–July, Russian producers began to recover from sanctions pressure, to find new alternative means of supply: leaving Baltic ports and using Russian ports instead and increasing supplies to friendly countries:

• India is the leader in this respect. According to preliminary data, exports of Russian fertilizers to India increased nearly threefold to 3.6 million tonnes, mainly due to an increase in the supply of phosphate-based fertilizers.

• Exports to the Middle East (primarily Turkey) also increased, by 40%, to 700 thousand tonnes.

• The share of Russian fertilizers in the African market increased considerably.

• There is a lot of potential for exports to South-East Asia, especially given that in 2022 Vietnam abolished its countervailing duty (USD 43/t) on DAP/MAP supplies from Russia. Vietnam imports about 3.5 million tonnes of various fertilizers every year.

Important competitive advantages for Russian products are the absence of cadmium levels that are dangerous to human health and soils, as well as Russian companies’ production flexibility with respect to a wide range of products.

The latter is the result of large-scale investment programmes on the part of industry leaders. Over the past nine years – since the beginning of the new investment cycle – Russian producers of mineral fertilizers have invested more than RUB 1.5 trillion in development. Over this period, production has increased by 43% to 26.3 million tonnes of active ingredient; exports, by 38%; and supplies to the domestic market have more than doubled.

In fact, a new, technologically advanced industry has emerged in Russia that is capable of operating flexibly in changing market conditions. An industry that was able to quickly redirect exports to alternative markets.

As a result, despite the difficult global situation, the production of the main types of mineral fertilizers – nitrogen-based, phosphate-based and high-tech complex fertilizers – increased during the outgoing year 5% by gross weight.

Russian farmers’ declared need for mineral fertilizers in 2022 was met by Russian producers back in October. This was about 5 million tonnes of product.

By the end of the year, purchases by Russian agricultural producers, taking into account previously accumulated stocks, will have increased by at least 15%. By mid-December, Russian farmers, according to the Ministry of Agriculture, had increased their purchases of mineral fertilizers to 5.4 million tonnes – that is, they are already building up stocks for their upcoming spring field work. That is now our priority task. For our country, agriculture is, for all intents and purposes, the new oil. Russia is becoming an agricultural superpower.

Based on data from Russia’s Ministry of Agriculture, we can expect the domestic market to expand next year and in the years that follow. The Ministry of Agriculture predicts that by 2030 purchases of mineral fertilizers will increase to 8.8 million tonnes of active ingredient, up from the current 5 million tonnes. And the average rate of application (according to the agribusiness development strategy) should increase to over 80 kg per hectare, up from the current 55 kg per hectare. Therefore, we expect the rapid intensification of agriculture to continue.

Fertilizer producers are prepared to support 100% of this growth by supplying their environmentally friendly and highly efficient products. After all, the interests of Russian agribusiness are the priority for the mineral fertilizer industry.

President of the Russian Fertilizer

Producers Association                                                                                     

Andrey Guryev