Russia’s revenue from fertiliser exports soared last year despite a decline in sales volumes, as crop nutrient prices rose sharply after its invasion of Ukraine.
In the first 10 months of 2022, Russian fertiliser exports jumped 70 per cent to $16.7bn compared to the same period in 2021, according to UN data.
Import statistics from Moscow’s trade partners show that, in volume terms, overseas sales by the world’s largest fertiliser exporter only fell 10 per cent from the same period the previous year, analysis by the UN Food and Agriculture Organization found.
This is despite analysts’ predictions at the outbreak of the war in February that shipments would collapse.
Food and fertiliser exports from Russia are exempt from western sanctions in order to support food security, especially for poorer countries. Moscow has been increasing its exports to countries such as India, Turkey and Vietnam.
“Clearly countries like India have been the biggest beneficiaries [in terms of fertiliser imports],” said the FAO’s Josef Schmidhuber.
Russian and EU officials have been concerned that some buyers and their banks and insurers were self sanctioning and avoiding buying products from Russia.
The EU last month clarified the exemption from sanctions for Russian agriculture and fertiliser exports after claims among EU member states that shipments were sometimes being held up due to worries over possible involvement of sanctioned Russian companies or individuals.
The EU introduced new exemptions allowing individual EU member states to unfreeze money of sanctioned individuals who were involved in the Russian fertiliser and agricultural sectors.
International prices fertiliser prices began to surge even before the war as Russia curtailed supplies of natural gas, the main feedstock for nitrogen fertilisers. Prices for potash, another important fertiliser, jumped after western governments imposed sanctions on Belarus, one of the leading producers of the crop nutrient, after Minsk quashed anti-government protests.
The sharp rise in gas prices after the Russian invasion led to plant closures in Europe, which drove up prices of nitrogen fertilisers, which are crucial to output and quality of food production.
However, Russia is unlikely to continue to benefit from higher prices this year. Recent falls in gas prices in Europe thanks to warmer than normal weather have led to lower fertiliser prices, with producers in the region ramping up production.
“This means imports by EU countries will fall considerably and is good news for farmers around the world,” said Schmidhuber.
European gas prices have now declined to levels not seen since before Russia’s invasion of Ukraine.
“European production is profitable and producers continue to churn out fertiliser,” said Chris Lawson, head of fertiliser at consultancy CRU. “Global nitrogen supplies are ample, and we expect continued declines in phosphate and potash prices,” he added of the three key nutrients.
Grain shipments have also returned to prewar levels. The volume of grains, including wheat and corn, shipped during the past three months of 2022 was up 21 per cent from the same period the previous year, according to data from vessel trackers Sea/.
One commodity that has not seen a recovery in exports is ammonia, a feedstock for nitrogen fertilisers, due to the closure of a pipeline through Ukraine. Russia accounts for about 12 per cent of the global ammonia export market, and the FAO data shows that Russian exports of the chemical, which is also used in industries such as plastics and textiles, fell 76 per cent by volume in the first nine months of 2022 compared to the same period the previous year.
The Black Sea grain agreement between Moscow and Kyiv brokered by the UN and renewed in November included a pledge to restart Russian exports of ammonia by reopening of the pipeline. Russian fertiliser companies and investors, including sanctions-hit Russian fertiliser billionaire Dmitry Mazepin, have been calling for a resumption of shipments although the recent fall in international nitrogen fertiliser prices weakens the urgency, analysts said.
Additional reporting by Andy Bounds in Brussels
Source: Economy - ft.com
