The Conflict between Russia and Ukraine has Pushed Up the Price of Chemical Fertilizers. 7 million tons Nitrogen Shortage in Europe. Global Potash Supply Could Be Huge Shortage!
Nitrogen Fertilizer Shortages in Ukraine and Other European Countries
Russia has unique geographical conditions, not only rich in oil, natural gas and other energy resources, but also one of the largest exporters of NPK fertilizers in the world. As one of the world's largest exporter of nitrogen fertilizers, facing sanctions from many Western countries, Russia is in many difficulties and restrictions on exports.
Due to the increasingly severe situation in Russia and Ukraine, fertilizer prices have risen sharply. The rise was mainly because the natural gas supply to Europe is facing the possibility of being cut off at any time, which led to the increase of the natural gas price. Some fertilizer plants had to stop or reduce production, resulting in a rise in fertilizer prices. The data showed that the price of urea rose to US$700 per ton on Feb. 24th, 25% higher than US$560 earlier last week.
Analysts believe that the rise in fertilizer prices is also related to the sanctions imposed by Western countries on Russia. As the "energy warehouse" of European countries, European countries will not impose sanctions on Russia from natural gas, but instead sanction Russia from other aspects. So fertilizer has also become one of the sanctionable directions.
In this regard, the president of the National Academy of Agricultural Sciences of Ukraine said that Ukraine currently has a shortage of nearly 2 million tons of nitrogen fertilizer, while the shortage of nitrogen fertilizer in Europe is even more serious, which has reached 7 million tons. And European countries and Ukraine are not the only victims of this dispute. The United States, as far as the east coast of the Pacific, is also suffering.
It is reported that most farmers in the United States have considered planting soybeans instead of corn. The reason is that corn requires a lot of fertilizers, and when the cost of fertilizers is so high this year, planting corn will obviously drive up planting costs. Instead Soybean planting doesn't require too much fertilizer, just pesticides and other small costs.
Global Potash Fertilizer Supply May Have a Huge Shortage
Among the three main fertilizer elements, potash supply may be the most affected by the Russian-Ukrainian conflict. Russia is the world's largest fertilizer exporter, with potash accounting for about 20% of the world's supply. Exports from Russia and its ally Belarus account for about 40% of global potash exports. China, Brazil and India are the main demanders.
Previously, market participants were worried that Europe and the United States would impose sanctions on the fertilizer exports of the two countries due to the conflict between Russia and Ukraine, which would cause a huge gap in the global potash fertilizer supply. Problems in any of these countries will shrink the global supply and push up the price of potash.
In 2022, the contract price of potash fertilizer in China and India has been locked at US$590/ton, a new high in 10 years. Industry insiders believe that due to overlapping supply times in China and India, coupled with strong demand for potash fertilizers in Brazil, the price of potash may remain high in the future. In addition, the transportation of potash fertilizer is generally by sea, and the uncertainty of the situation in Russia and Ukraine may increase the cost of sea transportation.
As Europe and the United States and other countries increase economic sanctions against Russia, the possibility of imposing an embargo on Russian fertilizers cannot be ruled out in the future.
Previously, after the signing of the Chinese potash fertilizer contract, the Chinese domestic price of potash also experienced a round of increase. At present, the mainstream price of potash fertilizer in China is 4300-4400 RMB / ton. This is relatively consistent with the global market price, the Chinese domestic market demand is good, the supply is temporarily tight, and the price is firm.
Current Nitrogen Fertilizer Situation in China
The rise in nitrogen fertilizer prices in Russia and Ukraine may be a good thing for China's local fertilizer companies. Among the potassium, nitrogen and phosphorus fertilizers made in China, nitrogen and phosphorus fertilizers can be self-sufficient, and the Chinese domestic farmers can choose domestic nitrogen fertilizers to reduce costs. In addition, China's inspection of chemical fertilizer exports started from October 2021 has become more complete and standardized, and the difficulty of exporting has increased, resulting in more nitrogen and phosphate fertilizers for Chinese market, which also makes the price lower than the overseas market.
Analysts believe that the Chinese domestic fertilizer supply is self-sufficient, forming a self-contained supply and demand system, which also limits the impact of the situation in Russia and Ukraine on China's fertilizer market. What China needs to import is potash fertilizer. At present, the domestic price of potash fertilizer is relatively close to the global market. Urea is one of the nitrogen fertilizers. According to the data, the recent international price of urea is US$700 (4417.49 RMB)/ton, while the domestic price of urea is 2600 RMB/ton, which is far lower than the international level and 700 RMB lower than the highest point last year.
It can be seen that under the current situation, China's domestic nitrogen fertilizer is completely controllable. Although spring ploughing is coming soon, the demand for fertilizers will rise, but there will not be too much price increase.
(Information sources: Financial Associated Press, Jinshi New Media, etc.)
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