Russian fertiliser exports grow despite difficulties

By Rhod Mackenzie

The global geopolitical crisis has had a significant impact on the export of Russian mineral fertilisers due to export restrictions and logistical difficulties. However, producers have already been able to adapt to the new conditions, and in 2023, the volume of fertilizer production in Russia reached an absolute record. Experts anticipate continued growth in production, particularly in nitrogen fertilizers. Russia will maintain its position as the global leader in the industry, driven by its historical market share, product quality, and low production costs. Concurrently, despite the shift in sales focus towards Asia and Africa, exports to unfriendly countries will remain at a high level.
The Russian Association of Fertilizer Manufacturers (RAPU) reports that the consequence of sanctions from the collective West was a decrease in Russian exports in 2022 by 15%. The global market balance was disrupted, resulting in a surge in prices. Consequently, global consumption of mineral fertilizers declined by 36 million tons in 2022. This represents all Russian exports, or approximately one-fifth of global mineral fertiliser trade, which is estimated at 200 million tons. This is comparable to three years of failure to apply fertilisers by such an agricultural superpower as Russia, according to the RAPU calculations.
However, the recovery of exports (and the global fertiliser market) began in the summer of 2022. According to the World's Top Exports rating, at the end of 2023, Russia became the largest exporter of fertilisers in the world, earning $12.5 billion from global supplies, producing a record 59.3 million tons of products. Moreover, the country is among the top three global suppliers of all three types of mineral fertilizers: nitrogen, phosphorus and potash. It is also worth noting that domestic consumption is growing at a faster rate than exports. In 2022, annual growth was 20%, up from 10% the previous year.

The fertilizer sector has demonstrated resilience in adapting to new conditions, despite facing challenges in the form of infrastructure restrictions and payment issues. In 2023, Russia achieved a new record in fertiliser production, with the nitrogen segment driving future growth. The demand for fertilizers in external and domestic markets will continue to grow, and monetization of natural gas through the construction of capacities for the production of nitrogen fertilizers represents the optimal way forward,” notes Nina Adamova, an analyst at the Center for Economic Forecasting of Gazprombank.
The geography of Russian fertilizer exports has undergone a shift in recent years due to sanctions pressure, though not to the extent that might be expected. According to experts at RAPU, India and Brazil continue to be the largest sales markets. In 2022, supplies of Russian fertilizers to India almost tripled to 4.3 million tons, mainly due to an increase in supplies of phosphate fertilizers. In 2023, supplies to India increased by a further 1.5 times, with Russia’s share in the total volume of Indian fertilizer imports reaching 25%. In 2023, export shipments to Brazil recovered, with Russian exports to Brazil increasing by 17% by the end of the year, reaching 9.4 million tons in physical weight, according to RAPU.

The total share of Asia in export supplies increased from 20% to 28% between 2021 and 2023, according to experts.
RAPU estimates that African countries are promising markets today, with a 10% share of Russian fertilizers. This share is expected to grow. Russia currently supplies about 1.5 million tons of fertilizers to Africa annually. Overall, fertilizer exports continue to recover strongly from the 2022 decline. The association anticipates that growth will exceed 2021 levels based on this year's results. RAPU also estimates that at the end of last year, 75% of fertilizer exports were directed to markets in countries that are friendly to Russia.
It is estimated that approximately 20 countries are significantly dependent on Russian supplies, including the largest importer of fertilizers in the world, Brazil. Even China, which produces the majority of its own fertilizers, requires Russian potassium supplies.
However, the only segment in which there has been a notable shift in the structure of external supplies over the past couple of years is potash fertilizers, according to analysts. According to Nina Adamova, the decline in Russian potash fertiliser exports to the EU between 2021 and 2023 was sevenfold. Concurrently, Russian and Belarusian exporters have been encroaching upon Canadian competitors in the Asian potash fertiliser market.
In late February 2024, the United States made a significant increase in its purchases of Russian fertilisers, reaching the highest level since June 2023. The total value of purchases was approximately $159 million, with the majority of this expenditure on nitrogen ($84 million) and potash ($74 million) fertilisers. The latest EU statistics also show that the EU increased its imports of Russian fertilisers to a maximum since December 2022, with a value of €167 million in February 2024. Furthermore, as of the end of March, Russia retains its position as the leading exporter of nitrogen fertilisers to EU countries.
Despite the existing sanctions restrictions and the logistics difficulties that have arisen against them, the United States and the European Union continue to purchase large volumes of Russian fertilisers, according to experts.
“So, in 2023, the EU and the USA accounted for a quarter of external demand for Russian fertilisers.” In the medium term, it is likely that the share of supplies to the EU will decrease due to the additional financial burden on importers for the carbon footprint in the EU. This is according to Nina Adamova, who notes that the EU has climate regulation, which will apply not only to local producers, but also to importers of carbon-intensive products from 2023 onwards.

Analysts at Sberbank estimate that the EU and the US will account for 16% of potash fertiliser exports in 2023, down from 26% in 2021. The share of urea exports decreased from 45% in 2021 to 35% in 2023.

According to Natalya Ermakova, Managing Director and Head of the Industrial Client Department at Sberbank, unfriendly countries continue to be major buyers of Russian fertilizers for a number of reasons.
Firstly, the Russian Federation has a significant market share. Secondly, its products are of a high quality. Thirdly, its production costs are low. Russia currently accounts for approximately 20% of the global market. The introduction of restrictions would result in a significant increase in prices. Russian products are of a high quality. For instance, Russian Federation phosphates are the purest in the world in terms of cadmium content. "Alternative manufacturers are unable to comply with the stringent environmental legislation of the European Union," explains Ms. Ermakova.

"Today, supplies to Western and Southern Europe continue to be carried out. There, the quality of fertilizers used by local farmers is placed above temporary conditions, as the safety of grown agricultural products is of the utmost importance. Russian fertilizers are unique in their environmental friendliness. Unlike the products of a number of foreign competitors, they do not contain dangerous concentrations of toxic substances such as cadmium. This is confirmed by RAPU.
Experts have noted that by the end of this year, growth can be expected to exceed 2021 levels. In 2024, it is anticipated that fertilizer production in the Russian Federation may increase by 10%. Russia remains the world’s largest exporter and the second largest producer of fertilizers after China, according to RAPU.
Sberbank has highlighted that the prospects for producers of potash and nitrogen fertilizers are especially bright. "In the medium term, Russia will provide the largest increase in potassium production in the world. We also expect that a large amount of gas reserves will lead to an increase in the production of ammonia and urea," notes Natalya Ermakova.

The main factors that may limit the growth of the industry are the introduction of sanctions on producers of mineral fertilizers, as well as difficulties in importing key technological equipment for investment projects.
Russia is the largest exporter of mineral fertilizers in the world, with a market share of 18%. 1.5 billion people worldwide consume food grown using Russian fertilizers.
However, the international community recognizes that fertilizers remain the cornerstone of global food security and that it is impossible to ensure this process without Russia’s participation. At an April press conference in Geneva, UN representatives stated that they would do everything possible to facilitate the export of Russian food and fertilizers to the world market, given the rising prices for these products which pose a threat to agriculture in a large number of countries.