The food crisis provoked by the war in Ukraine has led to the fact that Russia's income from the export of fertilizers has grown by 70%. This is evidenced by the statistics of the Food and Agriculture Organization of the United Nations (FAO), which was analyzed by the British Financial Times.
According to statistics, Russia’s revenues in dollar terms for the first 10 months of 2022 increased by 70% compared to the same period last year and amounted to $16.7 billion. At the same time, in quantitative terms, fertilizer exports from Russia fell, but not as much as expected initially: by only 10% against the initially predicted 20%. The Russian Association of Fertilizer Producers (RAPU)estimates the decline in exports even higher – at 15%.
Export of fertilizers from Russia was withdrawn from all sanctions restrictions amid fears of the development of a food crisis in the world's poorest countries. Removal of restrictions helped mitigate the impact of the sanctions, but not completely: the industry suffered from financial, logistical restrictions and "self-sanctions" – a situation where companies themselves refused to cooperate with Russian companies, although this was not officially prohibited.
India, Turkey and Vietnam became the main destinations for Russian fertilizer exports. India in the FAO is generally called the "main beneficiary" of the current situation. However, in 2023, the prospects for Russian fertilizer producers do not look so promising anymore. A warm winter, which led to a reduction in the price of gas – the main raw material for the production of fertilizers – has allowed the European chemical industry to restart its production and bring its products to the market, which is already reflected in prices.
According to Kommersant, prices for most types of fertilizershave already fallen by 10-25%. For example, a ton of carbamide fell to $420-520, the cost of diammonium phosphate fell to $620-720, and potassium chloride fell to $590-680. In addition to the return of European producers to the market, demand is also declining, which puts pressure on prices. Against this background, some experts expect the trend to continue.
“European production is profitable and producers continue to produce fertilizers. Global nitrogen supplies are ample and we expect further declines in phosphate and potash prices,” said Chris Lawson, head of fertilizer at CRU consulting firm.
The publication notes that food security problems have begun to soften, as monitoring of the volume of grain shipments indicates consistently high rates, and in the last quarter of 2022, they grew by 21% compared to last year. The only thing that still remains in partial deficit is ammonia. Russia accounts for approximately 12% of the world's ammonia exports, but the bulk of supplies came from the port of Odessa, to which the gas was transported via an ammonia pipeline from Tolyatti. Russia, Ukraine and the UN were negotiating the launch of the pipeline, the main beneficiary of the possible launch, Dmitry Mazepin, the owner of Uralchem, the largest fertilizer producer in Russia, took part on behalf of the Russian side.
The risks of growing food security problems could indeed accelerate the launch of the pipeline, but the reduction in shortages and the resumption of fertilizer production in Europe reduce the urgency of the launch of the ammonia pipeline, analysts say.