Fertilizer exports may increase even if quotas remain in place

The government decided to maintain fertilizer export quotas for another six months – the quota size was increased by 4%, to 16.95 million tons. Kommersant’s interlocutors in the industry complain that the complex procedure for issuing quotas is holding back exports, despite the fact that the domestic market is already sufficiently supplied at fixed prices. Nevertheless, in 2023, fertilizer exports from Russia, according to analysts, could grow by 20%, approaching the 2021 values.

The Ministry of Industry and Trade proposed once again extending the fertilizer export quota from December 1, 2023 to May 31, 2024 in the amount of 16.95 million tons. As follows from the draft government resolution, nitrogen fertilizers (urea and ammonium nitrate) will account for 9.8 million tons of the quota, and complex fertilizers (nitrogen-phosphorus and nitrogen-phosphorus-potassium) – 7.1 million tons.

The Russian government introduced quotas for the export of fertilizers from December 1, 2021 to guarantee the supply of the domestic market and as one of the measures to curb the rise in food prices. Since then, the restrictions have been continuously extended. Currently, under quotas, exporters must obtain a new license for each transaction. The quota of 16.3 million tons came into effect on June 1; in October, the Ministry of Industry and Trade proposed increasing it to 18.5 million tons, but in the end it increased by only 0.7 million tons.

In addition, fertilizer producers will likely have to extend domestic price fixes they voluntarily agreed to in 2021. The cost of products is indexed according to FAS recommendations and is now maintained at the 2022 level. At the end of 2023, as predicted by the Ministry of Agriculture, supplies of fertilizers to the domestic market should amount to about 5.4 million tons (an increase of 3.8%).

As RAPU explained to Kommersant, the Russian agro-industrial complex remains a priority consumer for the mineral fertilizer industry. “As of mid-October, manufacturers have already provided more than 95% of the forecast volume of agricultural purchases for the entire 2023. Now farmers are already purchasing supplies to meet their needs for next year. There is no doubt that this year’s forecast volume will be achieved in the first weeks of November,” they say. According to the association, average producer prices are lower than those fixed in the companies’ trade policies, as well as lower than export rates. According to Rosstat, the difference with the export price for urea is 22%, for ammophos – 15%, for NPK – 14%, for ammonium nitrate – 9%.

Several Kommersant sources in the industry remind that the government is forced to regularly increase previously established export quotas due to adjustments to the Ministry of Agriculture’s plan for purchasing fertilizers on the domestic market. “In the last six months alone, quotas have been revised three times, and manufacturers were not able to use all of them due to the late approval period,” Kommersant’s interlocutors explain. They also note that the procedure for obtaining an export permit and customs clearance is long, complex and slows down the development of export supplies; moreover, it will now be supplemented by an exchange rate export duty. In their opinion, it would be better to introduce an export permit procedure.

Back in June, chemical companies proposed canceling export quotas. The head of RAPU, Andrei Guryev, then called export duties and quotas unnecessary, given that prices for almost all types of mineral fertilizers fell two to four times, so producers do not receive any excess profits.

Independent expert Leonid Khazanov notes that fertilizer exports, despite falling prices, continue to grow and by the end of 2023 could reach 36 million tons. This is 20% higher than last year’s level and only 4% lower than the pre-sanction 2021 levels. At the same time, he says, world prices for fertilizers continue to fall. Thus, diammonium phosphate, which now costs $530–550 per ton, has fallen in price by half since August 2022.

Independent industrial expert Maxim Shaposhnikov notes that a possible increase in the quota for May-November indicates the presence of stable demand both in China and India, as well as in the EU, where supplies are coming against the backdrop of a decrease in its own production of nitrogen fertilizers due to expensive gas. He also believes that fertilizer exports from Russia could soon recover to 2021 levels.

Olga Mordyushenko