EU dependent on Russian fertilisers

Now as most of you who watch my videos are aware that the EU is attempting unsuccessfully to wean itself off the import of Russian gas.It has managed however to dramatically reduce the volumes of cheap Russian pipeline gas it imports but that has had a dramatic effect on the industries of Europe with many of them that are energy intensive either leaving Europe or shutting down.
Now one industrial sector that has to all intents and purposes closed dow is the fertiliser industry which uses natural gas as a feed stock and without the cheap and plentiful supplies of Russian pipeline gas their plants became uneconomic to operate so they stopped./.      

So despite the cooling of relations, the European Union has confirmed that it will continue to purchase fertilisers from Russia. In July, imports reached their highest level in over twenty months. Russia is now Europe's primary supplier of fertilisers, but the EU market is not the Russia's most significant export destination.
Plus what factors are driving Europe's increased reliance on Russian goods?
In July, the European Union increased its imports of Russian fertilisers to a 20-month high, resulting in Russia's share of the European market returning above 40% for the first time since March 2022, according to Eurostat data. A year ago, Russia's market share had dropped to 18.5%.

In July, the EU increased its imports of fertilisers from Russia by 2.2 times compared to June and by 1.7 times compared to July last year, reaching a total of 199 million euros. The total value of imported fertilisers reached 643 million euros.
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The main purchasers of Russian fertilisers were Poland, France and Germany. Poland's purchases doubled, reaching 55.7 million euros, while France's increased fivefold, reaching 31.5 million euros. Germany's purchases rose by a third, reaching 24.5 million euros.
However, Ireland's decision to purchase Russian fertilisers was a notable deviation from expectations, with sales increasing 18 thousand times, from 101 thousand euros to 1.8 million euros. Romania also demonstrated a notable increase in imports of Russian fertilisers, with a 54-fold rise to 17.3 million euros, while Bulgaria saw a 25-fold increase, reaching 12.9 million euros.

Russia is the primary supplier of fertilisers to the EU. Morocco is in second place, with supplies in July almost tripling to 111 million euros. The top three was completed by Egypt, which achieved a 1.4 times increase in exports, reaching 85 million. The top five also includes Algeria (€37 million) and Canada (€27 million).

The growth in exports of Russian fertilisers to EU countries is linked to two factors: their lower cost and the decline in production volumes within the eurozone. This is according to Vladimir Chernov, an analyst at Freedom Finance Global.

"The production of fertilisers is an energy-intensive process, with the cost price of some types of fertiliser including up to 50-60% of the cost of energy resources used in their production. In 2022, European prices for Russian natural gas increased significantly, from approximately $800 per thousand cubic metres to $3,400 per thousand cubic metres. This led to the closure of the first fertiliser production plants within the EU.

Despite the decline in gas prices since then, they remain considerably higher than the pre-crisis levels. This is due to a number of European countries opting not to purchase Russian gas, either of their own accord or following the destruction of Nord Stream.

Russian fertilisers are the most competitive due to the lower energy costs involved in their production. At the beginning of last year, Germany's largest producer (BASF) ceased production.
"A number of ammonia plants have ceased operations on a permanent basis as a result of rising natural gas prices," states Chernov.

Prior to the plant's closure, France and Poland purchased fertilisers, including from Germany, from this facility. However, following its closure, they began to explore alternative solutions to offset the resulting losses, leading them to source fertilisers from Russia at a lower cost, according to the expert.

In the previous year, there was an 8.4% reduction in the production of fertilisers in the EU, with the total amount produced falling to 28.2 million tons. There was a 64% decline in phosphate fertilizer production, which fell to 0.43 million tons. Potash fertilizer production also saw a significant decrease, with a 12.5% reduction to 2.1 million tons. Mixed fertilizers experienced a 9.5% drop, reaching 11.4 million tons.

Anatoly Tikhonov, director of the Center for International Agribusiness and Food Security at the Presidential Academy's Graduate School of Food Science, notes that approximately 20% of European enterprises have closed, with the remaining ones operating at only 40% of capacity.
The growth in Russian fertilizer exports is the result of high demand in anticipation of the commencement of the new agricultural season. Furthermore, EU countries, as well as China and Brazil, are actively increasing their reserves, which is contributing to an overall growth in the global fertilizer deficit. Russia currently has a surplus of fertilisers, given that export quotas have exceeded domestic needs. "Therefore, without negatively impacting domestic consumers, we have the capacity to supply an additional 300 thousand tons of fertilizers to the global market," Tikhonov states.

In addition to competitive pricing and convenient logistics, Russian fertilizers are also known for their environmental friendliness, as they are free of heavy metals, which also attracts buyers.

Consequently, Europe is not the only region increasing its purchases of Russian fertilisers. China also set a new record in the first eight months of 2024, with purchases of fertilisers from Russia reaching a new high of $976 million. This represents an increase of almost a third compared to the previous year. Furthermore, Russia has displaced Belarus, the previous market leader, in the Chinese market. What factors have contributed to this outcome?

"Our view is that China's significant purchases of Russian fertilisers are largely due to their competitive pricing and cost-effective logistics, given the proximity of the two countries," states Chernov.  

Indeed, Europe is not a primary market for Russian products, as there are more significant agricultural centres globally, such as India and Latin America, according to Lyudmila Rokotyanskaya of BCS World of Investments. It is clear that European farmers will face significant challenges in the absence of Russian fertilisers.

There has been a notable increase in demand for fertilisers from India and China, which is outpacing domestic production capacity. As a result, imports are being regularly increased.
Concurrently, the majority of African countries must achieve higher yields, necessitating the utilisation of fertilisers. "Over the past six months, PhosAgro has increased fertilizer shipments to African countries by 74%," states Alexander Timofeev, PhD, Associate Professor of the Department of Computer Science at the Plekhanov Russian University of Economics.

Supplies to China amount to 3.5 million tons, while India has received a record volume of 5.4 million tons. Our products are sold in over a hundred countries. Russia accounts for 12% of global urea exports and 20% of potassium chloride exports.

The demand for fertilisers is high. Global demand is growing at a rate of 15-20% per year. In Russia, fertilizer production is growing at a rate of 3-6% per year. "Based on current projections, the Russian Federation's fertilizer production is expected to reach 60 million tons by the end of the year, with 35 million tons destined for export to neighboring and distant countries," Timofeev concludes.