27 July 2022
“Lifting export restrictions on fertilizers by the Ukrainian Government opens up significant prospects for Ukrainian producers in the EU markets” – comment on the Forbes Ukraine
Group DF nitrogen line of business welcomes the Government’s decision to lift restrictions on the export of fertilizers. This decision will support Ukraine’s chemical industry and open up significant prospects for Ukrainian producers in the European markets.
“The Government’s decision to lift export restrictions is absolutely logical. In Ukraine, more than 160,000 tons of fertilizers, both of Ukrainian and foreign origin, are stored in warehouses. Given the surplus of nitrogen fertilizers in the domestic market and the current market situation, export restrictions do not make sense from an economic point of view. Ukraine is totally self-sufficient in nitrogen fertilizers and is capable of gradually tapping into the previously abandoned Western markets. Restarting the export of fertilizers can give a kind of “second wind” to the Ukrainian chemical industry, i.e. create new jobs and even increase the output,” commented Oleg Arestarkhov, Head, Corporate Communications Department, Group DF.
On March 24, 2022, the Cabinet of Ministers of Ukraine adopted Resolution No. 353 to introduce quotas of 210,000 tons per quarter for the export of fertilizers. On July 1, 2022, the CMU adopted Resolution No. 759 to reduce the export quota for mineral fertilizers from 210,000 tons per quarter down to zero.
On July 12, 2022, the Federation of Employers of Ukraine and the Union of Chemists of Ukraine appealed to the Government of Ukraine, stating that limiting the export of nitrogen fertilizers will lead to a decrease in production and jeopardize the payment of wages to employees of chemical industry enterprises.
According to Arestarkhov, Ostchem’s export destinations remain unchanged, i.e. Asia, EU, India, and Bangladesh. However, the EU market may become one of the most promising export markets for Ukrainian fertilizers in the coming 2 years. Another reason behind it is that Ukraine might soon become an EU member-state.
“Ukrainian companies can produce more than 2,000,000 tons of mineral fertilizers per year destined for the EU markets. Our plants fare well in terms of cost figures; they are competitive following the upgrade of industrial sites and due to lower labor costs. Will Ukraine be able to take advantage of these export prospects depends on many factors. In particular, on how fast the war will end and the destroyed export logistics chains, primarily maritime ones will be restored; on the price ratio for gas and fertilizers in the global markets; as well as on how consistent the EU’s policy will be regarding sanctions against Russian producers,” he said.
According to Ostchem analysts, the EU market capacity is about 13-14 million tons. Under an optimistic scenario, Ukrainian producers of nitrogen fertilizers can claim up to 15% of the EU market.
UAN, CAN and urea are the most promising for Ukrainian producers in terms of export to the EU.
“It does not make economic sense to export ammonium nitrate to Europe, whereas UAN, CAN and urea will be in demand,” believes Arestarkhov. – In terms of UAN, the most interesting markets include France (which buys more than 1,600,000 tons per year), Great Britain (280,000 tons) and Spain (155,000 tons). Until recently, these countries were dependent on imports from Belarus and Russia.”
Germany (imports 1,750,000 tons per year), France (1,000,000 tons), and Great Britain (500,000 tons) may become the major buyers of CAN to the EU.
“Belgium, where Eurochem, the Russian producer of mineral fertilizers continues to operate, partly balances Europe’s demand for CAN, though further ramp up of the EU sanctions policy might limit the opportunities for this Russian player in the European markets,” comments Arestarkhov.
According to Group DF representative, Poland is the most promising of the EU markets to sell urea.
“In Poland, urea market capacity is approximately 720,000 tons. Last year, urea imports in Poland reached about 200,000 tons from the Russian Federation and 67,000 tons from Belarus. I highly doubt that Poland will continue to buy fertilizers from these countries. The Poles have already given up gas. It is quite likely that fertilizers made from Russian gas will also be abandoned. This vacated niche may well be taken by Ukrainian producers,” says Arestarkhov.
Domestic consumption of nitrogen fertilizers by the end of 2022, taking into account the decline in demand by 40-70%, will range from 433,000 tons to 866,000 tons. Consequently, the chemical industry is capable to meet 100% domestic demand for nitrogen fertilizers even in the absence of imports.