Ukraine crisis highlights Russia fertilizer supply risk

  • Market: Fertilizers
  • 23/02/22

The crisis in Ukraine and potential responses from western governments targeting Russia could have wide-ranging effects on supply of fertilizer to global markets.

Russia is one of the world's most significant suppliers of fertilizer and related raw materials such as sulphur. It was the largest exporter of urea, NPKs, ammonia, UAN and ammonium nitrate last year, and the third-largest potash exporter (see table below). In phosphates, traditionally dominated by China and Morocco, Russia is a major exporter with a combined 4mn t/yr of DAP/MAP shipments last year. It is the fourth-largest sulphur exporter. At today's prices, typical Russian spring export volumes would account for over $2bn/month in revenue.

The major markets for Russian fertilizers and related raw materials include Brazil and, ironically, the EU and US. Russian nitrogen products are of particular significance to European buyers at present as the continent remains lightly supplied for spring fertilizer applications after several nitrogen plants were forced off line for extended periods by high natural gas prices. European natural gas feedstock costs remain elevated, with prices at the TTF hub rising yesterday by around 10pc to €83/MWh ($28/mn Btu).

As of 23 February, no sanctions imposed by the US, UK or EU governments have targeted Russian commodity exports or had significant impact on the fertilizer industry.

Price response in fertilizers has so far been muted, with the exception of the ever-volatile Nola urea market, which leapt by around $40/st yesterday as traders reacted to the possibility of US sanctions affecting Russian urea exports.

Exports from Russia of some fertilizers have already been somewhat curtailed by the export controls imposed by the government late last year, with a two-month ban on ammonium nitrate shipments in place since the start of February.

Russian fertilizer exports and market share in 2021
ProductTonnageExport market shareExport market rank
MOP11,832,71727%3rd
Ammonium nitrate4,313,22949%1st
Urea6,999,81418%1st
NPKs5,928,14238%1st
Ammonia4,424,34230%1st
DAP/MAP4,048,08114%4th
Sulphur1,805,5679%3rd

Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
26/03/24

Baltimore bridge collapse forces freight changes

Baltimore bridge collapse forces freight changes

Washington, 26 March (Argus) — Vessel traffic in and out of the Port of Baltimore, Maryland, has been suspended indefinitely in the wake of a container ship collision early today that brought down the Francis Scott Key Bridge, an accident that will force the rerouting of coal, car and light truck shipments. The prolonged closure of one of the largest ports on the US east coast could have a ripple effect on trade flows across much of the US, as shippers grapple for alternatives in the absence of a certain reopening timeline. Search and rescue efforts are still ongoing in the Patapsco River, after the 116,851dwt Dali headed to Colombo, Sri Lanka, slammed into a bridge support. The crew had lost control of the vessel. The Dali is owned by Grace Ocean and managed by Synergy Marine Group. The Maryland Port Administration said it does not know how long it will take for the shipping channel to be cleared and for traffic to resume. Shipping companies are bracing for a closure of at least two weeks, but many expect the clean-up effort could take significantly longer. President Joe Biden vowed the federal government will provide whatever resources are needed to get the port "up and running again as soon as possible." The port is a major trade hub for steam and coking coal, automobiles and scrap metal. Many market sources are still trying to determine whether the disruption will be dramatic enough to move prices. But coal markets were already being affected today. Baltimore is home to two key coal export terminals: eastern US railroad CSX's Curtis Bay Coal Piers and coal producer Consol Energy's Consol Marine Terminal. The facilities are upstream of the bridge, meaning ships will not be able to serve them until the route reopens. The terminals handle thermal and coking coal from Northern and Central Appalachia. They have a combined export capacity of 34mn short tons (30.8mn metric tonnes). The two terminals loaded 2.4mn t of coal in February, up from 2.1mn t a year earlier, according to analytics firm Kpler, mostly exports to India and China. An India-based trader said that the suspension of coal exports will probably raise prices in India, as brick kilns enter the peak production season in the summer. Buyers could look to petroleum coke as a substitute, but the higher sulphur content may not be appealing to some users despite the higher calorific value. Prices for deliveries to northern Europe are also likely to rise given that the Netherlands, Germany and Belgium combined are the second-largest market for North Appalachian coal. April API 2 futures rose by $2/t to $113.30/t. The incident has added a "level of volatility [which] could have big implications," a European paper broker said. The lack of information has prompted some coal producers to hold off on activating force majeure clauses in their contracts. Curtis Bay is served only by CSX, while CSX and fellow eastern carrier Norfolk Southern serve Consol. CSX said it is in contact with existing coal customers and contingency plans are being implemented. The railroad at this point intends to keep Curtis Bay open but will continue to assess the circumstances moving forward. Norfolk Southern did not respond to questions. Some scheduled Baltimore coal exports may be redirected to the other three eastern US coal export terminals in Hampton Roads, Virginia, but such reroutings likely will entail increased costs. Not all coal mines will be able to shift terminals. Such decisions will depend on available capacity in Hampton Roads. Exports from the three terminals in January reached a five-year high , signaling somewhat limited capacity. Mine location and railroad access may also determine whether coal can be rerouted, an industry source said. But some producers do not have much of a choice about trying to send coal to Hampton Roads. They may need the cash so will be forced into a decision. The producers most vulnerable to delays may be Consol and Arch Resources. Arch's Leer coking coal mine may be in the best position because it co-owns Dominion Terminal Associates in Hampton Roads with Alpha Metallurgical Coal Resources. The sudden lack of export capacity could put a floor under US coal prices, which have mostly been falling since last year amid low domestic demand. The competition to replace Baltimore coal exports could prevent further cuts, another coal trading source said. Metals sources say the accident will have only isolated effects on the global ferrous scrap market, but many market participants are still assessing the situation. The port is the 10th largest ferrous scrap export port in the US, and over the last five years an average of 44,000 metric tonnes/month of ferrous scrap was exported from Baltimore, according to US Department of Commerce data. But the port closure is likely to affect other freight. Baltimore is the nation's top handler of automobile traffic. Motor vehicles and parts accounted for about 42pc of all Baltimore port imports and 27pc of all exports, according to state data. The Port of Baltimore handled 847,158 cars and light trucks in 2023. "It's too early to say what impact this incident will have on the auto business — but there will certainly be a disruption," said John Bozzella, chief executive of industry trade group Alliance for Automotive Innovation. Dry bulk freight rates likely unaffected Several sources told Argus Baltimore's closure is unlikely to have a major impact on dry freight rates despite short-term interruptions to coal transports. "We are in the shoulder months with less demand for thermal coal," a shipbroker said, suggesting mild global temperatures means the collapse "may not have too much of an impact" on freight markets overall. Vessel traffic in ports such as Charleston, South Carolina, and Savannah, Georgia, may increase on diversions from Baltimore. Kpler identified 17 vessels that will likely be impacted because they are either in the Port of Baltimore or were expected to load there in the coming days. By Abby Caplan, Gabriel Squitieri, Luis Gronda, Evan Millard and Brad MacAulay Port of Baltimore coal terminals Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Read more
News

Jera delays Hekinan NH3-coal co-firing test: Correction


26/03/24
News
26/03/24

Jera delays Hekinan NH3-coal co-firing test: Correction

Corrects trial period in first paragraph Osaka, 26 March (Argus) — Japan's largest power producer by capacity Jera has pushed back a trial to co-fire 20pc of fuel ammonia with coal at its Hekinan power plant to after the end of March. Jera previously said the co-firing demonstration at the 1GW Hekinan No.4 unit will start on 26 March at the earliest . But the company has decided to push this back. The trial will begin sometime after the end of this month, Jera said on 25 March. It took more time to test run equipment ahead of the demonstration, with safety the main priority, it added. It is unclear when exactly the company will start the trial to co-fire 20pc of ammonia with coal. Jera aims to demonstrate 20pc co-firing of ammonia with coal ahead of planned commercial operations in the April 2027-March 2028 fiscal year. It also hopes to achieve a 50pc mixture on a commercial basis in the first half of the 2030s. By Motoko Hasegawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Yara curtails 2023 European ammonia production by 19pc


25/03/24
News
25/03/24

Yara curtails 2023 European ammonia production by 19pc

London, 25 March (Argus) — Europe's largest fertiliser producer Yara operated its European ammonia plants at nearly a fifth below their capacity last year, despite its weighted-average gas costs more than halving compared with 2022. Yara curtailed 19pc — or 890,000t — of its ammonia production capacity last year, while it curbed its finished fertiliser production capacity by 15pc, it said in its annual report released last week. This was distinctly below ammonia curtailments of 35pc in 2022 , when the firm insisted it "will not produce or sell at negative margins". Yara's European plants have an average efficiency rate of roughly 36mn Btu per tonne of ammonia produced, according to Argus Consulting estimates, which implies that 890,000t of lost ammonia production is equivalent to about 786mn m³ of gas demand. That said, the firm prioritised production at its most efficient plants such as Sluiskil in the Netherlands and Brunsbuttel in Germany, from which it exported to its less efficient sites where production ran at lower rates. Yara curtailed nearly a fifth of its ammonia capacity, despite its European weighted-average gas cost more than halving to $14.90/mn Btu from $31.80/mn Btu in 2022. Prices were still much higher than in previous years — they were lowest at just $3.60/mn Btu in 2020 ( see prices graph ). Yara's global ammonia production edged down to 6.39mn t in 2023, from 6.51mn t in 2022. And it stayed well below a 2019 peak of 8.48mn t in 2019, suggesting the firm has moved more towards imports to bolster its own production, rather than prioritising strong run rates at its facilities. Yara operates in a "world of volatility" because of military conflicts in Ukraine and the Middle East, which affect global supply chains, the firm said. "Strengthened operational flexibility" remains a priority in this context, it said. The firm has warned repeatedly of geopolitical risks associated with an influx of Russian fertiliser output fed by gas that is much cheaper than in Europe. "Vladimir Putin is using fertilisers as a weapon of war," Yara said. "We're sleepwalking into repeating the same mistake with fertilisers as we did with Russian energy imports," Yara's chief executive Svein Tore Holsether told Argus in February . But Yara expects higher European production in 2024, as gas prices have continued to come down while fertilisers prices have held firm. Assuming stable gas purchases, gas costs in the first and second quarters could be $320mn and $100mn lower, respectively, than in the same period last year, Yara said in February . The firm suggested its European ammonia assets could run at or above 90pc of capacity. In regions with "efficient gas markets", Yara seeks exposure to spot market prices "unless exceptional market circumstances clearly give reason for deviation", it said. But in regions without such "efficient" gas markets, the firm prefers entering longer-term contracts "if favourable gas prices are obtainable". Yara has a "high" risk appetite for exposure to gas prices because securing access to, and stable supply of, favourably-priced gas is "imperative to our operations and competitiveness", the firm said. "All of our European gas contracts are hub-based, and we are well positioned to cover the risk of spot exposure," Yara said. At the same time, up to 70pc of its European plants can operate on imported ammonia. Yara's largest gas suppliers are Engie, Shell, Equinor, India's Gail, and Trinidad and Tobago's national gas company, it said. The firm consumed just under 6bn m³ globally in 2023, down from a peak of 6.87bn m³ in 2019 ( see gas consumption graph ). By Brendan A'Hearn Yara weighted-average gas costs $/mn Btu Yara global gas consumption bn m³ Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Fertilizer affordability weakens in 1Q24 on higher N, P


25/03/24
News
25/03/24

Fertilizer affordability weakens in 1Q24 on higher N, P

London, 25 March (Argus) — Global fertilizer product affordability trended lower through most of the first quarter of 2024, as crop prices slid on higher expected global supplies, while nitrogen and phosphate fertilizers remained at high levels before coming under pressure in the second half of March. The decline in nutrient affordability this quarter comes at a time when farmers start preparing for the spring fertilizer application season in the northern hemisphere. The Argus fertilizer affordability index ⁠— a global assessment calculated using the ratio between the fertilizer and crop price index ⁠— fell to the lowest quarterly average since the fourth quarter of 2022. Nutrient affordability weakened by 10 percentage points since the start of the year, to 1.03 points in March from 1.13 points in January. An affordability index above 1 indicates that fertilizers are more affordable compared with the base year, which was set in 2004, while below 1 indicates lower nutrient affordability. High urea, phosphate prices weigh on affordability The fertilizer index ⁠— which includes international prices for urea, DAP and potash adjusted by global usage ⁠— has reached the highest quarter average since 1Q23, owing to high urea and phosphate prices. Urea prices surged through the second half of January, following a bearish end to 2023, initially spurred by short-covering and fresh demand from European markets in the wake of an Indian purchase tender. Levels out of Egypt jumped by around $70/t through the month to over $400/t fob for European markets. Prices remained firm through the first half of February, supported by strong demand from Australia and Thailand, as importers warily eyed rising prices. The supply-demand balance east of Suez was also tightened by plant closures in Iran and Malaysia, as well as restrictions on Indonesian shipments prior to the elections on 14 February. But a return of urea supply east of Suez, a slowdown in buying and weaker gas prices pressured urea levels through the second half of February and into March across most markets, apart from the US, resulting in prices to weaken on the month. For phosphates, DAP/MAP prices remained high on tight supply through the first quarter, while China refrained from exporting product. Also strong demand in Australia and the US diverted cargoes away from other markets. Limited MAP supply and emerging demand encouraged suppliers to raise their offers in March in the west. Meanwhile, in the east, the imminent reopening of China is adding to expected supply, and has turned DAP markets bearish. Traders have started to short Chinese DAP with India's RCF awarding its latest buy tender at $575/t cfr — $20/t lower than the last reported cfr sale into India. But for now, prices remain far above the breakeven price of around $509/t cfr, given the reduced Indian DAP subsidy of 21,676 rupees/t for the April-September kharif season. Crop prices under pressure High fertilizer prices so far in the quarter coincided with a decline in grain prices for wheat, corn and soybeans owing to expectations of higher global supplies in the coming season. This has led to the crop price index — the key element of the affordability index — falling to its lowest point since the fourth quarter of 2020. Global wheat output is forecast to reach 799mn t in the 2024-25 season (July-June), according to the International Grains Council (IGC), up by 10mn t from the IGC's 2023-24 projection, but consumption is expected to be flat on the previous season. Global corn production is also expected to rise in 2024-25, up by 6mn t on the year to 1.233bn t in 2024-25. And global corn consumption is forecast to increase, up by 18mn t to 1.23bn t in 2024-25. Carryover corn stocks for major exporters are set to increase by 7mn t on the year to 78mn t, according to the IGC. As for soybeans, the IGC forecasts global production to rise by 23mn t to 413mn t in 2024-25 because of larger acreages and improved yields. Global consumption is projected to rise by 21mn t on the year to 404mn t, according to the IGC. The council also expects higher carryover stocks at 75mn t in 2024-25, up by 9mn t on the year. By Lili Minton, Harry Minihan and Tom Hampson Global Fertilizer Affordability Index (points) Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Jera considers joining ExxonMobil’s H2 project in US


25/03/24
News
25/03/24

Jera considers joining ExxonMobil’s H2 project in US

Osaka, 25 March (Argus) — Japan's largest power producer by capacity Jera is considering joining an ExxonMobil-led hydrogen and ammonia production project in the US, aiming to boost its ammonia import portfolio in its efforts to reduce coal use. Jera has signed a framework agreement with ExxonMobil to jointly explore the development of blue hydrogen and its derivative of ammonia at ExxonMobil's Baytown complex east of Houston, Texas, the Japanese firm said on 25 March. Jera will explore the possibility of importing around 500,000 t/yr of ammonia and securing a stake in the project through the deal. ExxonMobil is developing a hydrogen production plant and a carbon capture and storage (CCS) facility at its Baytown complex, aiming to begin operations in 2028. The plant would produce around 900,000 t/yr of hydrogen, part of which will be used to produce around 1mn t/yr of ammonia, Jera said. Jera is separately working with Norway-based fertilizer producer Yara and US ammonia producer CF Industries to develop blue ammonia production on the US Gulf coast, targeting production of more than 1mn t/yr under each partnership. Jera has not decided yet whether it wants to invest in the upstream projects. Jera said it can proceed with projects to invest in low-carbon ammonia production and marketing only with financial and other support from the government . The private sector cannot make upstream or downstream decisions on fuel ammonia "based on just pure business judgment," Jera chief executive Yukio Kani said at CERAWeek by S&P Global in Houston on 20 March. Beyond funding, the government will have to help set safety and other standards for the new type of fuel, Kani said. Jera aims to import around 2mn t/yr of fuel ammonia in 2030 , which is nearly 70pc of Japan's current 2030 ammonia demand target of 3mn t/yr. The company is planning to start testing the use of ammonia at its 1GW Hekinan No.4 coal-fired unit by the end of this month. Tokyo and Washington have also geared up efforts to strengthen their ties in clean energy technology development, alongside private-sector partnerships. Japan's trade and industry ministry and the US Department of Energy held a second US-Japan clean energy and energy security initiative plenary meeting on 19 March, ahead of a US-Japan leaders' summit in April. This is aimed at accelerating cooperation in developing and deploying clean energy technology such as nuclear energy, floating offshore wind, perovskite solar cell, geothermal, hydrogen and its derivatives, including ammonia and synthetic fuels, as well as carbon management. By Motoko Hasegawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more