Russian ban seen triggering global nutrient crisis

V.Sajeev Kumar |Vishwanath Kulkarni | | Updated on: Mar 11, 2022

Indian fertiliser makers react cautiously, await more clarity on US sanctions

Russia’s ban on fertiliser exports is likely to have a serious crisis impact not only for India but for the whole world. The Indian fertiliser industry is cautious in terms of reacting to the Russian ban on exports while awaiting more clarity on the extent of US sanctions and emerging developments in the region. A section of the industry feels that the crisis, if it prolongs, could trigger further price rise of potassic and phosphatic nutrients, which have been ruling high for past several months

Enough stocks

Russia and Belarus account for a significant chunk of India’s potash imports. It also supplies nutrients like DAP and ammonia. “It is too early to gauge the impact. We don’t have adequate clarity on the extent of sanctions,” said P S Gahlaut, Managing Director of Indian Potash Ltd (IPL), the largest importer. He further added that IPL’s suppliers in Belarus and Russia have agreed in principle to supply the cargo, but said they are facing problem in the movement of the cargo and getting a risk cover as the companies offering insurance are in the West. “Fortunately, we have no crisis as we have enough material to take care of the requirement for 3-4 months,” Gahlaut said.

Russia and allied countries like Belarus help meet about a third of the global requirement of muriate of potash (MoP). Prices of MoP have already moved up from $590 per tonne from $230 over the past several months.

India has imported 50 lakh tonnes of MoP in 2021 and of this, 30 per cent is from Belarus. Some Indian fertiliser makers are reported to have entered into tie-up with Canada to meet the shortage, industry sources said.

M.P.Sukumaran Nair, Director of the Kochi-based Centre for Green Technology said that on an average India imports 58 per cent of complex fertilisers, 36 per cent potash and 10 per cent urea from Russia. India also imports 30 per cent of urea from China. However, the reduction of exports from China since July following the shutting down of many production plants and the current Russian export ban would lead to a crisis, as India cannot sustain without urea for wheat and rice. Urea price has already gone up by 22 per cent to touch $740 per tonne.

The port disruptions and sanctions might have prompted Russia to ban fertiliser exports. “Since we have good relations with Russia, the supplies can be made from Vladivostok, a major port city in Russia, directly to Chennai Port via Singapore. The government should explore these options despite the fact that the logistic cost for the movement of fertilizer from production units in Russia to Vladivostok is on the higher side”, Nair said, adding that there are also options to source potash from Canada, Morocco and Jordan.

Serious impact

The fertiliser shortage in view of the export ban will have a serious impact on all major plant nutrients such as nitrogen, phosphorus and potassium, Nair said.

N Suresh Krishnan, MD and CEO, Paradeep Phosphates sees a challenge in supply of potash and DAP. “We will have to recalibrate the availability of these nutrients from other geographies,” Krishnan said. “One would expect that the conflict gets resolved soon as considering the quantity of potash that one gets from Russia, it may not easy to swap with other geographies.”

Last month, Russian firm PhosAgro said, “The start of 2022 has been marked by continued high demand for phosphate-based fertilizers thanks to the early resumption of DAP/NPK purchases from India due to low carry-over stocks and higher subsidies for fertilizer purchases. Since the beginning of the year, India has already purchased more than 1.5 million tonnes (mt) of phosphate-based fertilizers for delivery during January-March of 2022, thus counterbalancing off-season activity in other markets.”

Sources said some PSUs led by National Fertilizers (NFL) had signed MoU with PhosAgro in September last year for securing 2.5 lakh tonne of the crop nutrients through a government-to-government initiative between India and Russia. Now with the export ban and sanctions in place, there is uncertainly about Russian firm PhosAgro meeting its commitment to complete the supply of 2.5 lakh tonne of urea, DAP and MoP to India during 2022 (January-December).

“An additional factor supporting (global) prices is the ongoing restrictions on fertilizer exports from China in favour of supplies to the domestic market,” sources said.

Contracts for phosphoric acid imports by Indian companies were signed at $ 1,330 per tonne (CIF) in October-December of 2021, which was $ 170 per tonne higher than the price in 3Q 2021.

Global prices for nitrogen-based fertilizers (urea) also reached record highs, mainly due to the ongoing energy crisis and record increase in natural gas prices in Europe, PhosAgro had said. “The introduction of restrictions on urea exports from China led to an imbalance whereby the demand in Asian markets outstripped the supply, especially in India,” it said.

Contracts for phosphoric acid imports by Indian companies were signed at $ 1,330 per tonne (CIF) in October-December of 2021, which was $ 170 per tonne higher than the price in 3Q 2021.

Global prices for nitrogen-based fertilizers (urea) also reached record highs, mainly due to the ongoing energy crisis and record increase in natural gas prices in Europe, PhosAgro had said. “The introduction of restrictions on urea exports from China led to an imbalance whereby the demand in Asian markets outstripped the supply, especially in India,” it said. ( With inputs from Prabhudatta Mishra in New Delhi)

Published on March 11, 2022
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