/ world today news/ Against the backdrop of expensive gas and anti-Russian sanctions, fertilizer prices have risen and a deficit is forming. Many chemical plants in Europe have closed due to high fuel costs. At the same time, exports from Russia fell to a minimum, agricultural products became more expensive. Moscow’s revenue from the sale of agrochemicals increased by 70% last year, despite the decline in sales. Instead of the EU, the most important raw materials now go to other regions.
Reduction in production
The energy crisis also affected the chemical industry in Europe. Production of ammonia, a key element in nitrogen fertilizers, has declined.
Thus, the market leader, the Norwegian “Yara”, had to reduce its capacity by 40%. The British “CF” closed two factories, and the German BASF also partially stopped. According to the industrial group “European Fertilizers”, 80% of the costs in this industrial segment are from gas.
China introduced agrochemical export quota to ensure domestic market and food security. The world fertilizer market has become even smaller.
In addition, potash prices have skyrocketed due to Western sanctions against Belarus, a leading producer of the crop nutrient.
Acute deficiency
There is an acute shortage of fertilizers on the market. The forecasts of the World Bank for a 70% increase in prices have come true – a record of 70 years.
Russian exports of nitrogen, phosphate and potash fertilizers fell, reducing global stocks by 15 percent. However, from May 23, 2022, the government has extended the six-month quotas for certain types of products.
In September, the EU lifted the ban on fertilizers from Russia. But only formally. “The situation is complicated, because there are no direct sanctions, but there are restrictions related to logistics, ship charter, money transfers, insurance,” Vladimir Putin commented on this decision at the time.
Huge income
In the context of sanctions against shareholders and managers of Russian chemical companies, supplies of mineral fertilizers to Europe have decreased by 10%. But revenue rose 70% to $16.7 billion (January-October data).
The fact is that sales were reoriented to Asia. Products are shipped to China, India, Turkey, Vietnam, as well as Bangladesh, Thailand, Burma, Cambodia, Indonesia. Despite the partial release from Western restrictions, Moscow continues to look for alternative buyers.
“Obviously countries like India have been the main beneficiaries,” said Josef Schmidthuber, a spokesman for the UN’s Food and Agriculture Organization.
European farmers are suffering from shortages and paying exorbitant prices, says Leonid Khazanov, an independent industry expert.
Excessive expectations
According to the Financial Times, Russia is unlikely to “continue to benefit from high prices” this year. “The recent drop in gas prices in Europe due to warm weather has reduced the price of fertilizers,” the paper said.
“Manufacturing in Europe is becoming profitable,” expert Chris Lawson was quoted as saying in the paper.
However, such expectations may be too optimistic. The EU should not rely on low prices due to the temporary cheapening of blue fuel and the restart of chemical production.
“The new purchases of gas will increase the quotations and the enterprises will again reduce their capacities. Agrochemicals will become more expensive along the chain and eventually food products will follow them,” Khazanov is confident.
The way out, he notes, could be the complete lifting of sanctions against shareholders and managers of Russian chemical companies, restoration of cooperation with Western banks and logistics operators. But so far the European Union has not thought of this.
Translation: V. Sergeev
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