Russia announces nitrogen export quotas just below average levels to secure domestic supply

With great pomp, the Prime Minister of Russia, Mikhail Mishustin, on 3 November announced on state-owned television that temporary export quotas on nitrogen fertilizers will be introduced for a period of six months.

The export quota for nitrogen fertilizers was set at 5.9m. tonnes and will come into force from 1 December, meaning November shipments will not be impacted. Urea, ammonium nitrate and UAN will be impacted with ammonia and ammonium sulphate understood to not be in the list of products to face export restrictions.

The Ministry of Industry and Trade will set out individual export quotas in co-ordination with the Ministry of Agriculture for each producer and product group.

Producers continue to await export allocations, as well as formal details of the latest announcement. However, with ammonium nitrate the favoured nitrogen product in the Russian domestic market, the quotas are expected to primarily target AN export volumes. Of note, the Russian domestic market consumes less than 10% of Russia’s nameplate urea output.

Export statistics – The 5.9m. tonnes of nitrogen export allocation is sizeable but below the average exports of AN, UAN and urea (combined) from December-May.

• December 2020-May 2021 – combined exports were 6.37m. tonnes. (Urea – 3.69m. tonnes. AN – 1.76m. tonnes. UAN – 927,000t).
• December 2019-May 2020 – combined exports were 6.32m. tonnes. (Urea – 3.61m. tonnes. AN – 1.57m. tonnes. UAN – 1.15m. tonnes).
• December 2018-May 2019 – combined exports were 6.10m. tonnes. (Urea – 3.33m. tonnes. AN – 1.54m. tonnes. UAN – 1.23m. tonnes).

This leaves a shortfall of 200-470,000t or 3-7% across the three product groups over six months, or 33-78,000t per month. While these volumes are small, the shortage comes at a time when global nitrogen supply is already tight with buyers in the east (India/South Korea/Australia) and west (USA/Brazil/Europe) competing for limited supply.

Rationale – The Russian government’s actions appear to be a pre-emptive move to ensure that Russian producers do not export far greater volumes than in previous years as international prices/export business offers better netbacks to domestic markets.

Indeed, the government has already issued domestic price caps on ammonium nitrate in order to control fertilizer price increases in the domestic market. The cap differs from one producer to another but on average is at around $300pt fob equivalent. Meanwhile, export values are at around $600pt fob with ongoing strong demand from European markets that have faced production cutbacks due to the high European gas prices.

Crucially, the quotas will continue to allow the bulk of Russian exports to continue in the coming months. Unlike China, this is not a blanket ban on exports or intended to sharply reduce export volumes. The move is clearly aimed at ensuring domestic supply while state price caps on fertilizers further protect the agricultural sector.