Many believe the world placed sanctions or blockades on Russian fertilizer, but an industry observer says that’s a myth
Plenty of misinformation has been circulating about Russia’s fertilizer production and exports, says an analyst.
“For all the mainstream media concerns about the loss of supply of Russian fertilizer, it simply did not happen,” said Mike Nash, senior editor of fertilizers with Argus Media.
Russia handles a huge portion of world fertilizer trade with its share amounting to 23 percent for ammonia, 21 percent for potash, 14 percent for urea and 12 percent for phosphate.
Markets panicked when Russia invaded Ukraine, sending fertilizer prices soaring for the second time in one year.
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The first spike occurred following the COVID pandemic in late 2021 as the global economy was recovering, freight rates were soaring and natural gas prices shot up, causing a curtailment in the European Union’s nitrogen fertilizer production.
Just as prices subsided, China began restricting exports of urea and diammonium phosphate (DAP) to keep a lid on domestic prices.
And then war broke out in Ukraine and markets quickly reacted to the threat of western sanctions against Russian fertilizer exports.
There was only one problem with that logic.
“There were no official sanctions put on Russian fertilizer products,” Nash said in a recent webinar hosted by Argus.
Some individual companies decided not to do business with Russian fertilizer manufacturers because they were concerned about vessel availability, rising insurance costs, financing issues and soaring Black Sea freight rates.
But they soon overcame those obstacles and Russian fertilizer started flowing to markets around the world.
The country ended up exporting 7.9 million tonnes of urea in 2022, a 12 percent increase over 2021 levels as Russian manufacturers ramped up production of the commodity.
Contrary to popular belief, a lot of the increased exports went to western countries like the United States, the Netherlands, Germany and France.
“This is one of the myths, that European and western entities turned their backs on Russian product,” said Nash.
“That did not happen.”
Other markets also got in on the action.
“India took an awful lot more. That was a big dumping ground for urea in 2022,” he said.
Russian exports of DAP and monoammonium phosphate (MAP) also flourished.
The country shipped out more than four million tonnes of phosphate in 2022, about a 500,000-tonne increase over the previous year.
“Again, this myth that phosphate supply was curtailed is simply not true. They actually exported more,” said Nash.
India increased its purchases of Russian phosphate by 650,000 tonnes.
The one Russian fertilizer product that did actually crash was potash, with shipments falling 37 percent compared to 2021.
Russia could not move product through certain Black Sea ports. It shipped almost no potash to the European Union, but it was able to move some product by rail to China.
Brazil accounted for a much larger share than usual of Russian potash exports.
Russia’s strong urea and phosphate export program is a main reason fertilizer prices have been plummeting in recent months.
Nash’s short-term outlook for urea is for prices to continue to edge down due to oversupply from China as it turns the taps back on.
He is also forecasting slow urea import demand from Northern Hemisphere countries.
Phosphate markets are under pressure as well because of healthy stocks in India.
“It is under no pressure to step into the import market in any significant way,” he said.
Brazil is also on the sidelines as it senses that MAP prices are sliding.
Potash prices are also expected to fall, although more demand may emerge in Brazil, the U.S. and the EU during the second quarter of 2023.
