Ukraine enters unknown with domestic production uncertain and Russia sanctioned

Ukraine turned to Turkey this week for some of its seasonal demand of ammonium nitrate. Traditionally Ukraine has serviced the majority of its fertilizer demand through domestic production with the remainder imported from neighbouring Russia.

However, with relations between the two nations at historic lows and tit for tat sanctions impacting fertilizer markets too, Ukraine has been forced to look further afield for imports. This week, around 10-15,000t of Turkish AN was imported into Ukraine in several lots. More imports are expected with import demand for AN alone at 200,000t for the upcoming season.

In addition, Ukraine’s own production of urea has been heavily impacted by the conflict with some plants permanently taken out and the rest having to contend with higher gas prices. State subsidies of gas were incrementally withdrawn while Russia increased gas prices in line with western Europe.

A case in point has been the OPZ production facility, which, despite several gas tolling tenders over the last few months, is yet to commence production. This has left a significant hole in supply for the domestic market with some estimates suggesting up to 300,000t of urea imports are required spring 2019.

Ukraine, once an exporter of around 300,000t per month of urea through the Black Sea, has like China in the East, virtually disappeared from the export market and is now seemingly heading to deficit.

However, this too, would not prove to be simple as Ukraine’s port infrastructure is designed for loading vessels and not unloading them. In most cases, ports cannot handle above 10,000t of imports at any one time.

By Michael Samueli, Nitrogen Market Reporter

E: Michael.Samueli@profercy.com