Who will hear whom? A worrisome situation in Ukraine’s market of mineral fertilizers

21.06.2017

A rather worrisome situation has developed in Ukraine’s market of mineral fertilizers to date. This may put at risk the timely provision of fertilizers for growers to carry out autumn field work.

The stoppage of OSTCHEM’s plants and antidumping measures against import of some Russian nitrogen fertilizers to Ukraine, which were restored in May 2017, have complicated the situation in the Ukrainian market of mineral fertilizers and caused their prices to skyrocket lately. The trader premium for ammonium nitrate has reached 130%. The market has turned wild and ineffectively premiumish. In addition, the situation is aggravated by heavy indebtedness of OSTCHEM before farmers who have paid it for mineral fertilizers in advance. In addition, the market is adversely influenced by its monopolization and the Anti-Monopoly Committee’s inactivity in it.

The product quality is also a topical issue for the market. Growers report occasional discrepancies between labeled and real amounts of the active ingredients in fertilizers. This indicates that the State Service of Ukraine for Food Safety and Consumer Protection supervises the mineral fertilizer market inadequately.

According to estimates of the Agrarian Policy and Food Ministry, roughly 650 KMT of mineral fertilizers will be needed for conducting this fall’s field work. The main question – will farmers’ needs be met in full? – is still left open, reports UkrAgroConsult.

ammonium nitrate

OSTCHEM expects that nitrogen fertilizer production at its plants in Rivne and Cherkasy will be fully restored by June 25-26, 2017. As before, the main problem faced by manufacturers is the price for natural gas, as they need roughly 2 Bl m3 of this feedstock a year for full-scale operation.

To replace natural gas as a chemical raw material, it is topical to develop synthetic gas production in Ukraine, in particular from coal. This will contribute to a significant decrease in the feedstock component’s price. Market participants believe such an investment project would meet most of chemical plant’s gas needs, which amount to some USD 3 Bl, in nearly two or three years after the launch of production.

In the opinion of the government, the settlement of the issue of supplying growers with mineral fertilizers is to be facilitated by introducing a zero customs duty on imports of nitrogen fertilizers (except for those from Russia). This is expected to protect agricultural producers against seasonal price fluctuation and substantially reduce the cost of fertilizers for our farmers.

However, market participants are not so optimistic on this matter, referring to possible logistic and market problems. The feedstock shortage will also adversely impact operation of Ukrainian chemical plants. Market players are more inclined to the opinion that lifting the antidumping duty on Russian fertilizers or at least reducing it to 10% and solving the gas price problem would produce a substantial positive effect and relieve the market from a political tinge.

Ultimately, providing growers with mineral fertilizers will depend on how rapidly all the stakeholders influencing the mineral fertilizer market – officials, fertilizer manufacturers, traders and growers – achieve mutual understanding and jointly make a right decision. This will become an important basis for a rich harvest in the future.

 

UkrAgroConsult

Readers choice: TOP-5 articles of the month by UkrAgroConsult