Head of Uralkali Vitaly Lauk on fertilizer exports and the impact of sanctions

The CEO of the company spoke about how Uralkali sees the situation on the global fertilizer market, export plans for 2023 and a possible new tax increase for the industry. Vitaly Lauk.

— How do you assess the current situation in the global potash market and the price level?

— In general, the world market is going through a cycle of low prices. On the one hand, this is not very comfortable for producers at the moment, on the other hand, it will gradually restore and stimulate further growth in demand for fertilizers, which will allow prices to be adjusted upward.

– Does it make sense now in long-term contracts with the largest consumers India and China, who is now more profitable for such contracts?

— Uralkali is positive about long-term contacts with both China and India. Yes, we are interested in them. In April, we were the first among producers to conclude a long-term contract with Indian consumers for the supply of potassium chloride until September 30, 2023 at a price of $422 per ton on the terms of delivery at the buyer’s port (CFR).

— What strategy does the company follow in the global market: is volume or price more important?

— Our plans are to restore the historical market share at the level of 2021.

— How much did the sanctions complicate the work of the company?

– Formally, our company is not under sanctions, since the whole world understands that it is impossible to disrupt the supply chain of fertilizers. But at the same time, we feel their influence – issues related to logistics, procurement, settlements, etc. were complicated.

At present, all the main issues related to the replacement of imported – European and American – spare parts and equipment have been resolved. The bulk are Russian manufacturers. We buy part of the equipment from China and other friendly countries.

— Has the situation with fertilizers detained in European ports been resolved?

— The process of interaction is constructive. We are optimistic that the entire volume that was decided to be delivered as a charity product will be delivered. As part of the initiative for humanitarian deliveries to Africa, cargoes have already been delivered to Malawi and Kenya, about 50 thousand tons. Nigeria is expected to be the next country to receive the humanitarian shipment of fertilizer.

— What dynamics of export do you expect at the end of the year?

— In general, we expect an increase in the volume of export deliveries by the end of the year.

— Does the arrival of Belarusian fertilizers in Russia complicate your own supplies?

— It does not complicate things, since we have established long-term contacts with consumers of our products in the Russian Federation, and our Belarusian colleagues need to build a distribution system from scratch. We are optimistic, demand for potash fertilizers in the domestic market shows stable growth.

— What is the company’s debt load and are there any problems with debt servicing?

— The company is doing everything possible to ensure stable debt servicing. The Group complies with all financial and non-financial covenants, except for certain covenants and a number of overdue payments on syndicated pre-export loans. This is caused by the introduction of various restrictions by foreign states and the actions or inaction of a credit agent who is in an unfriendly jurisdiction.

For Eurobonds: payments to holders, the rights to which are recorded in the Russian accounting infrastructure (and this is about 90% of the issue), are made through NCO JSC NSD. After that, payments are made in favor of foreign holders, which, unfortunately, are frozen by the payment agent – Citibank London.

At the end of 2022, the company’s net debt/EBITDA ratio was 1.7.

— Do you expect an increase in the fiscal burden on the chemical industry?

— We see that the government and relevant ministries are considering options for collecting additional taxes from the chemical industry, but it is too early to talk about the amounts and calculation methods.

Interviewed by Olga Mordyushenko