Although fertilizer prices have eased from their peak levels in early 2022, they remain at historically high levels. The softening in prices partly reflects weakening demand as farmers reduce field applications of fertilizer brought about by affordability and availability issues. The sector is also affected by supply-side issues such as production congestion in Europe, disruptions caused by sanctions imposed on Russia and Belarus, and trade restrictions in China.
Production Shortage in Europe
A sharp rise in natural gas prices in Europe is leading to widespread production cuts of ammonia, a key input for nitrogenous fertilisers. As of October 2022, approximately 70% of European ammonia production capacity has been reduced or closed. However, input costs have fallen in recent months due to increased imports of liquefied natural for national reserves in Europe and expectations of a milder winter. This may allow some closed nitrogen fertilizer production facilities in Europe to restart operations.
Supply Interruptions Due to the Ukraine-Russia War
Following Russia's invasion of Ukraine in February 2022, many economies (including the EU and the US) imposed sanctions on Russia and Belarus, both of which are major fertilizer suppliers. However, trade sanctions have established "exceptions" for the food and fertilizer sectors to avoid negative impacts on global food security. These exceptions enabled Russia to continue exporting fertilizer. However, potassium exports from Belarus have fallen by more than 50% due to the restriction on the use of EU territory for transit purposes.
Export Restrictions in China
China's extension of restrictions on fertilizer exports until the end of 2022 in order to maintain domestic availability has increased supply concerns. DAP exports from China, which accounts for 30% of global DAP trade, fell nearly 50% (y/y) in the first ten months of 2022. By the way, I can say that China's urea exports decreased by approximately 60% (y/y) in the same period.
Developments in Russia
Russia sold at least 6.6 billion dollars worth of fertilizer to the world market in the first half of 2023. The largest buyers of Russian fertilizer were recorded as Brazil, India and the USA.
According to United Nations (UN) Statistics Office (Comtrade) data, Russian companies supplied a total of 6.6 billion dollars worth of fertilizer to 57 countries in the January-June period of this year.
While information about some traditional buyers, especially in Africa and Asia, was not disclosed in the databases, almost half of Russia's fertilizer exports went to Brazil with a volume of $1.9 billion and India with $1.3 billion. The USA ranked third, purchasing 890 million dollars worth of fertilizer from Russia, while China's fertilizer imports from Russia reached 632 million dollars, and Mexico's imports reached 429 million dollars.
Among the top 10 buyers of fertilizer imports from Russia are Turkey, which spent 170 million dollars for its fertilizer needs during the reporting period, and Germany, which imported 151 million dollars, while Serbia, France and Kazakhstan also supplied more than 100 million dollars of fertilizer from Russia.
While Guatemala's imports of Russian fertilizer increased to 93 million dollars in the January-June period of 2023, the imports of Poland, known for its harsh policies against Russia, increased to 77 million dollars. According to current data, many European countries such as Bulgaria, Spain, Netherlands, Czechia and Italy continue to purchase fertilizer from Russia.
According to the Russian Federal Customs Service (FTS), Russia supplied fertilizers worth $19.295 billion to world markets last year, while these volumes are 1.5 times more than in the previous year.
As a result, the fertilizer industry stands at a crossroads balancing challenges and opportunities. While natural gas price volatility and geopolitical tensions create challenges, manufacturing innovations and the changing energy landscape offer opportunities for resilience and adaptation. As the industry navigates these complexities, stakeholders need to collaborate to ensure a sustainable and secure future for global agriculture.
Source: Worldbank, accessed 25.11.2023 Best regards,
