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Russian companies increased fertilizer supplies to the European Union (EU) by 1.7 times in annual terms to 1.9 million tons. This follows from the data of the European Statistical Agency (Eurostat), which was reviewed by Vedomosti.  In monetary terms, exports increased by 30% to 649.4 million euros.

In May, the supply of fertilizers increased by 17% compared to the level of May last year to 238,400 tons. In value terms, they amounted to 77.4 million euros (+5%). This growth mainly occurred in potash and complex (complex, containing several nutrients) fertilizers, it follows from the statistics. 

Supplies of Russian nitrogen fertilizers to European countries are also growing. Their exports increased by 39% in annual terms to 1.1 million tons in five months. In May, shipments increased by 35% to 179,000 tons.

The largest buyers of Russian fertilizers in January - May were: Poland - 467,700 tons (24% of all supplies), France - 228,500 tons (12%), Germany - 214,300 tons (11%) and Italy - 188,100 tons (10%). In total, these countries accounted for 57% of Russian fertilizer supplies to the EU. Last year, in 2023, the EU reduced imports of Russian fertilizers in physical terms by 6% to 3.92 million tons. The largest buyers were: France - 676,500 tons, Germany - 671,200 tons, Poland - 605,000 tons and Belgium - 359,100 tons.

Supplies of potassium fertilizers to the EU countries for five months of the year  grew issued four fold to 182,500 tons. In May exports of this type of fertilizers grew 2.2 times as compared with May 2023 to 21,800 tons.  Exports of complex fertilizers doubled in January–May to 619,600 tons, although in May deliveries decreased by 22% to 37,700 tons.

Supplies of Russian nitrogen fertilizers to European countries are also growing. Their exports over five months increased by 39% year-on-year to 1.1 million tons. In May, shipments increased by 35% to 179,000 tons.

The largest buyers of Russian fertilizers in January - May were: Poland - 467,700 tons (24% of all supplies), France - 228,500 tons (12%), Germany - 214,300 tons (11%) and Italy - 188,100 tons (10% ). In total, these countries accounted for 57% of Russian fertilizer supplies to the EU. Last year, the EU reduced imports of Russian fertilizers in physical terms by 6% to 3.92 million tons. The largest buyers were: France - 676,500 tons, Germany - 671,200 tons, Poland - 605,000 tons and Belgium - 359,100 tons.

European sanctions against Russia do not apply to the supply of fertilizers. The only measure that directly affected this industry was the quotas imposed by the EU from July 10, 2022 to July 9, 2023 on imports of potassium chloride and complex fertilizers containing potassium from Russia. In 2021, according to Eurostat, imports of Russian potash fertilizers amounted to 760,000 tons, complex (of all types, including nitrogen-phosphorus) – 2.63 million tons. In 2023, imports of potash fertilizers to the EU amounted to 300,000 tons, complex – 1.28 million tons.

Import of fertilizers by EU from Russia  in thousand tons  Source: Eurostat

Year	January	February	March	April	May	Total
2024	443,8	520,3	475,7	252,8	238,4	1931
2023	214,7	210,3	279,1	259,4	203,8	1167,3
2022	658,9	503,9	548,2	154	122,3	1987,3

Nevertheless, the EU has imposed personal sanctions against a number of Russian businessmen who own or previously owned assets in the field of fertilizer production, as well as top managers of these companies. In addition, the supply of fertilizers to the EU is negatively affected by sanctions restrictions in the field of logistics, insurance and finance.   According to the Russian Association of Fertilizer Producers (RAPU), fertilizer exports from Russia in 2023 amounted to 40 million tons (+25% compared to 2022), and production increased by 9% to 59.3 million tons. In June 2024, the president of RAPU, Andrei Guryev, told Vedomosti that the production and export of fertilizers this year could grow by 10% compared to last year and reach 65.2 million and 44 million tons, respectively.

The cost of production of fertilizers in the EU (especially nitrogen fertilizers) increased sharply in 2022 against the background of a jump in gas prices. The gas is used to produce ammonia, a raw material for the production of nitrogen fertilizers, as well as fuel in power plants (fertilizer production is energy–intensive). Due to high gas prices in 2022, a number of major European fertilizer producers – Polish ANWIL and Grupa Azoty, Lithuanian Achema – were forced to suspend production.

According to the Russian Association of Fertilizer Producers (RAPU), fertilizer exports from Russia in 2023 amounted to 40 million tons (+25% compared to 2022), and production increased by 9% to 59.3 million tons. In June 2024, the president of RAPU, Andrei Guryev, told Vedomosti that the production and export of fertilizers this year could grow by 10% compared to last year and reach 65.2 million and 44 million tons, respectively.

The cost of production of fertilizers in the EU (especially nitrogen fertilizers) increased sharply in 2022 against the background of a jump in gas prices. The gas is used to produce ammonia, a raw material for the production of nitrogen fertilizers, as well as fuel in power plants (fertilizer production is energy–intensive). Due to high gas prices in 2022, a number of major European fertilizer producers – Polish ANWIL and Grupa Azoty, Lithuanian Achema – were forced to suspend production.

The period of high gas prices in the EU began in the autumn of 2021 due to problems with filling underground storage facilities after record gas extraction in the winter of 2020/21, as well as energy shortages as a result of reduced wind farm output amid calm weather. By December 2021, spot gas prices in the EU reached a record, exceeding $2,200 per 1,000 cubic meters, and in March 2022, quotations set a new historical maximum, approaching $3,900 per 1,000 cubic meters. A steady decline in gas prices began in December 2022.

But in the first half of 2024, prices stopped falling. On July 19, August gas futures at the most liquid European TTF hub in the Netherlands were trading in the range of $361-369 per 1,000 cubic meters, according to ICE exchange data.

The increase in fertilizer supplies to Europe is caused by the attractive price of fertilizers compared to products from European manufacturers, experts interviewed by Vedomosti say.

The advantage of Russian companies lies in low production costs and, as a result, high competitiveness of their products, says Yaroslav Kabakov, Director of Strategy at Finam IC.

Sergey Grishunin, Managing Director of the NRA rating service, agrees that European fertilizer producers, with the exception of Norwegian Yara, were losing out to Russian ones in terms of cost even before the energy crisis began in the EU in 2021. Now this advantage, according to him, has become even more tangible.

According to Mark Boychuk, project manager of the Agro-industrial complex and Consumer Sector practice at Strategy Partners consulting company, the refusal to import Russian fertilizers would lead the EU to an increase in prices for agricultural products, and after some time – to the need to import them, including from Russia.

Kabakov notes that the steady demand for fertilizers on the world market supports their prices. The cost of fertilizers in the ports of the Baltic Sea may increase in the coming months, which will allow Russian companies to increase production and exports, the analyst believes.

Grishunin notes that the prices for urea are based on FOB ("with loading on the ship") Baltics, may grow from $273/t in the second quarter to $314/t by the end of the year (+15%). Kabakov adds that prices for phosphorus fertilizers by the end of the year may increase by 13% to $588/ton, potash fertilizers by 18.5% to $232/ton.

Source: https://www.vedomosti.ru/business/articles/2024/07/23/1051503-es-naraschivaet-import-udobrenii-iz-rossii?utm_campaign=newspaper_23_7_2024&utm_medium=email&utm_source=vedomosti