Europe has significantly increased imports of fertilizers from Russia in 2023

In 2023, against the backdrop of a reduction in gas supplies from the Russian Federation to Europe, Russian chemical companies increased sales of gas processing products—nitrogen fertilizers—to this market. A key reason is high gas prices, which caused EU nitrogen fertilizer production to fall in 2022 and not recover. But experts warn that if gas prices in Europe continue to fall and nitrogen fertilizer prices rise after falling in 2023, this could increase the competitiveness of European plants and reduce imports from Russia.

Former buyers of Russian gas in Europe in 2023 significantly increased the import of nitrogen fertilizers from the Russian Federation, according to a study by the Center for Price Indexes (CPI). Thus, purchases from Germany almost doubled compared to last year and more than seven times compared to 2021, reaching almost 550 thousand tons. France increased purchases by about a quarter and doubled, respectively, to approximately 440 thousand tons.

Experts note that Russia retains first place in imports of nitrogen fertilizers into EU countries, and its share in total imports increased over the past year by two percentage points, to 24%.

Other major suppliers to the EU are Egypt, Algeria and the USA.

In general, as the head of the Russian Association of Fertilizer Manufacturers Andrei Guryev reported, the volume of Russian exports of all types of fertilizers to unfriendly countries, which fell by a quarter in 2022, to 10 million tons, may decrease by another 15–20% in 2023.

The main reason for the increase in imports of nitrogen fertilizers from the EU was the unprofitability of its own production. Thus, according to CCI calculations, in the fourth quarter, Russian export prices for urea were lower than the cost of its production in Europe. Global quotations for nitrogen fertilizers declined throughout the first half of the year, but partially recovered in the second half. By the end of the year, the cost of urea and methanol on various supply bases was around $300 per ton, ammonia – about $600 per ton, which is more than one and a half times lower than in December 2022. At the same time, gas consumption in the EU fell by 7% in 2023 and stabilized only in the fourth quarter (in December, imports amounted to 39.1 billion cubic meters).

Russian chemical companies also confirm an increase in purchases of nitrogen fertilizers from the Russian Federation in the largest sales markets.

Internal trade between EU countries is declining due to production stops in 2022 against the backdrop of high gas prices and unstable industry performance in 2023, says one of Kommersant’s sources in the industry. At the same time, he notes, the export of nitrogen fertilizers from Russia is growing mainly due to increased supplies to Western European countries. Nitrogen fertilizer exports to non-EU countries rose by 4.5 million tonnes (60%) to 12 million tonnes back in 2022, and remained high throughout 2023, he says. In general, the global market for nitrogen fertilizers is 245–250 million tons per year, of which Russia produces about 11.5% – 28.5 million tons per year.

But, as noted by the Center, in the short term, one of the risks for Russian suppliers may be a decrease in gas prices, which will increase the profitability of European production and may lead to a reduction in imports of nitrogen fertilizers from the Russian Federation. Taking this into account, experts assume a reduction in the spread between Russian export prices for urea and the cost of its production in the EU, which will lead to a slowdown in the dynamics of exports to this market or its decline.

According to the calculations of Implementa consultant Evgenia Popova, the spread between the price of gas and urea in Europe in 2023 has decreased by more than half compared to the pre-crisis values ​​of 2021, so the economic feasibility of urea production in the EU is questionable. One of the reasons for the narrowing of spreads is the fall in urea prices: at the end of 2023, quotes fell by more than 30% compared to the same period in 2022. Other risks for the Russian nitrogen sector in foreign markets are considered by experts from the Center for Economics and Economics and the Center for the Study of the Possible Strengthening of European Regulation.

Olga Mordyushenko