Russian Fertiliser Exports to the EU Soar Amid Rising Energy Costs and Geopolitical Disruptions

Russian fertiliser exports to the European Union surged by an impressive 43% year-on-year in August 2024, reaching 3.3 million tons, according to recent data from Metals & Mining Intelligence (MMI), as reported by the Vedomosti business daily.

In terms of monetary value, these exports rose by 32%, generating approximately €1.1 billion ($1.21 billion). This growth underscores Russia’s continuing role as a key player in the global fertiliser market, particularly in light of the challenges faced by European producers.

A Shift in the Fertiliser Market Landscape

The EU’s reliance on Russian fertilisers is growing at a time when local production has been hit hard by rising energy costs. Russia, one of the world’s top producers of fertilisers, has capitalized on these market conditions, increasing its shipments to meet Europe’s demand.

Despite ongoing geopolitical tensions and sanctions on various sectors of Russia’s economy due to the conflict in Ukraine, most Russian fertilisers have not been sanctioned, allowing this crucial trade flow to persist.

The biggest portion of the increased exports in August came from complex fertilisers—those that contain multiple nutrients essential for plant growth. Shipments of these fertilisers grew 1.8 times compared to the same month last year, reaching 1.2 million tons.

Additionally, exports of potash fertilisers—a key nutrient for many crops—jumped by 2.6 times to 370,000 tons, while nitrogen fertilisers saw a 13% increase, with exports totaling 1.7 million tons.

Top Buyers: Poland, France, and Germany

Among the EU countries, Poland emerged as the largest buyer of Russian fertilisers, importing 857,000 tons, a significant 2.7-fold increase year-on-year. France followed with 380,000 tons, an 18% rise, while Germany, in contrast, reduced its purchases by 17%, importing 375,000 tons.

Poland’s sharp increase in fertiliser imports reflects its growing dependence on external sources to meet agricultural needs, while Germany’s reduction could signal a shift in its energy policy or strategic decisions to decrease reliance on Russian commodities.

These variations among countries highlight the complexity of Europe’s fertiliser market, which is shaped by a variety of factors, including domestic production capacities, geopolitical strategies, and the availability of alternative suppliers.

Rising Energy Costs Cripple EU Fertiliser Production

The dramatic rise in fertiliser imports from Russia is largely a consequence of soaring production costs in the EU. Fertiliser production, particularly nitrogen fertilisers, is an energy-intensive process that relies heavily on natural gas.

The price of natural gas, a key raw material for ammonia production—the main ingredient in nitrogen fertilisers—has skyrocketed since 2022, primarily due to the broader energy crisis in Europe exacerbated by the war in Ukraine and cuts in Russian gas supplies.

European fertiliser producers have struggled to cope with these rising costs.

According to Maxim Bratchikov, MMI’s Fertiliser Market Manager, high natural gas prices have forced many local producers to either scale back or suspend their operations. Companies like Poland’s ANWIL, Grupa Azoty, and Lithuania’s Achema have all halted production as the cost of maintaining operations became unsustainable.

Adding to the pressure, the ongoing conflict in the Middle East has further complicated the supply chain, making it more difficult for European countries to secure fertilisers from alternative sources.

This situation has paved the way for Russia to step in and fill the gap, particularly as its fertiliser industry remains relatively insulated from the direct economic impacts of sanctions and disruptions in energy markets.

Russia’s Dominance in the Global Fertiliser Market

Russia’s significant role in the global fertiliser market cannot be understated. According to the UN Food and Agriculture Organisation, Russia is the world’s largest exporter of nitrogen fertilisers and one of the top exporters of both potash and phosphate fertilisers.

This global influence makes it a critical supplier to agricultural markets worldwide, including the EU.

Russia’s major fertiliser producers, including Uralchem Group (which also controls Uralkali), Phosagro, Acron, and Eurochem, have maintained steady production levels despite the global economic challenges. In the first eight months of 2024, Russia’s total fertiliser production rose by 12%, reaching 18.8 million tons of active ingredients.

Ammonia output, which forms the backbone of nitrogen fertiliser production, increased by 6% to 12 million tons over the same period, according to data from Rosstat, Russia’s state statistics agency.

This robust production capacity allows Russia to remain competitive in the international fertiliser market, even as other producers struggle with rising costs and supply chain disruptions. It also provides Russian exporters with a strategic advantage, enabling them to strengthen trade ties with key European markets.

The Outlook for the Fertiliser Market

As long as energy costs remain high in Europe and supply chain issues persist, the EU is likely to continue its reliance on Russian fertilisers. The current geopolitical and economic climate suggests that European producers may face further difficulties in scaling up their production capacities, leaving a growing demand for imports.

For Russia, this presents an opportunity to bolster its position as a dominant global exporter of fertilisers, particularly to markets that are grappling with supply shortages.

However, the situation also highlights the EU’s vulnerability to external supply shocks and the need for long-term strategies to diversify its energy and raw material sources to stabilise its agricultural industry.

In conclusion, the significant growth in Russian fertiliser exports to the EU in 2024 is a direct consequence of rising production costs in Europe and the disruption of supply chains. As the EU continues to face energy challenges, Russia’s role as a key fertiliser supplier is likely to expand, making it a critical player in the global food production system.

Main Image: By Вадим Анохин – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=8190404