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The Ministry of Industry and Trade has developed rules for issuing general, one-time and exclusive licenses for the supply of goods abroad for which export quotas apply. The relevant draft government decree has been published on the portal regulation.gov.ru . This includes the export of fertilizers abroad, the introduction of general export licenses for which companies have been asking since the summer of 2023. The need to replace the current quotas with general licenses was announced in June last year by the Russian Association of Fertilizer Producers (RAPU; includes the largest enterprises in the industry, except Uralchem).

In 2023 the volume of fertilizers production in Russia was 59.3 mil tons (Source: Statistics of the Association RAPU). In 5 years the production of fertilizers can reach 70 mil tons.  

RAPU members have prepared a proposal to switch from export quotas to licensing, which is not limited by quotas," the release said. A representative of RAPU clarified to Vedomosti that such a proposal had been brought to the Federal executive authorities.

Quotas for the export of nitrogen and complex fertilizers were introduced on December 1, 2021 as one of the measures to curb the growth of food prices in the domestic Russian market. The current export quota of 16.95 million tons is valid from December 1, 2023 to May 31, 2024.

The validity period of the general license will be set by the government "on a case-by-case basis." But in any case, the license will end in the calendar year for which the quota is provided. At the same time, the Ministry of Industry and Trade will be able to refuse to issue a gene license if the quota volume at the time of approval is already fully selected by exporters, follows from the draft resolution of the Cabinet of Ministers. Thus, with the introduction of general licenses, the Ministry of Industry and Trade does not intend to completely abandon quotas, as previously requested by manufacturers.

A Vedomosti source close to one of the exporters explained that both export quotas and one-time export licenses are currently applied to fertilizers. That is, the exporter, according to him, must receive a new license for each transaction within the agreed quota. As a result, not all manufacturers manage to export abroad as many products as they have agreed within the quotas, due to the fact that they have to apply and wait for approvals under new licenses.

A representative of the Ministry of Industry and Trade confirms that the introduction of general licenses will "reduce the bureaucratic burden" on fertilizer exporters and on the ministry itself. But the possibility of lifting export quotas requires additional study with the Ministry of Agriculture, he emphasizes. At the same time, the Ministry of Industry and Trade does not expect a negative impact of the introduction of general licenses on the supply of fertilizers to the domestic market. 

RAPU continues to insist on the abolition of quotas. "In order to solve the task set by the country's leadership to increase non–primary non-energy exports, it seems advisable to abandon the quantitative restrictions on the export of mineral fertilizers established by regulators and the issuance of one-time licenses within the framework of export non-tariff quotas in favor of a permissive procedure for the export of fertilizers," the representative of the association said. He also draws attention to the 1.5-fold increase in the production of mineral fertilizers in Russia over the past 10 years. In 2023, according to Rosstat, the output of fertilizers amounted to 59.3 million tons in physical weight (+9% by 2022).

In 2020 and 2021. Russia exported 34.1 million and 37.6 million tons of fertilizers, respectively, and at the end of 2022, the head of RAPU, Andrei Guryev Jr., said that in 2022, supplies abroad fell by 15% year on year. At the end of 2023, he expected the volume of fertilizer exports to recover to the level of 2021. Rosstat and RAPU do not disclose current export data.

Subject to further recovery of exports and the development of the domestic fertilizer market, the volume of their output may grow to 70 million tons in the next five years, the RAPU predicts. "We are ready to meet the need of Russian farmers for fertilizers by 100%," the representative of the association assures. Promising markets for exports to RAPA are considered to be the countries of Africa, where the share of Russian companies accounts for 10% of total fertilizer imports. European consumers, according to the representative of the TURNIP, reduced consumption, but did not abandon Russian products.

The European Union (EU) did not restrict the supply of fertilizers from Russia as part of the sanctions. The only measure introduced by the EU is quotas for imports of potassium chloride and complex fertilizers from Russia from July 10, 2022 to July 9, 2023. The EU has imposed sanctions on former owner and CEO of Uralchem Dmitry Mazepin, former CEO of Phosagro Andrey Guryev Jr., co-founder of Eurochem Andrey Melnichenko and shareholder of Akron Vyacheslav Kantor. Also, the export of products to the EU is negatively affected by sanctions restrictions for Russian companies in the field of logistics, insurance and finance.

Eduard Zernin, President of the Union of Grain Exporters, told Vedomosti that he sees no point in lifting quantitative restrictions on fertilizer exports, since the current quota mechanism allows Russian farmers to increase their consumption and "get record harvests." If quotas are abolished, then the formation of a deficit in the domestic market is not excluded, he emphasizes.

General licenses serve the same purposes as export quotas, but are a more flexible tool, says Vasily Danilov, a leading analyst at IC Veles Capital. In his opinion, they will allow regulators to more effectively maintain a balance between domestic demand and export supplies. "Potentially, the regulator can influence fertilizer exporters through the temporary suspension of the license. The draft government decree places special emphasis on this," Anastasia Vladimirova, Managing Partner of IPM Consulting, draws attention.

Current global fertilizer prices are attractive to Russian producers, although they have decreased from the highs of 2022, Danilov points out. The cost of phosphorus fertilizers based on FOB ("delivered on board") Baltika is now at $580/ton, the cost of urea in early February increased to $310-315/ton FOB Baltika, says Boris Krasnozhenov, head of the Securities Markets Analytics Department at Alfa Bank. In January, the head of the marketing department of Phosagro, Andrey Ryabinin, said that in 2023 prices for fertilizers have fallen significantly (by 30-50% for potash and nitrogen, by 10-15% for phosphorus), which has made them more affordable for farmers. The price of phosphorus fertilizers, according to Ryabinin, in the second half of 2023 was fixed at $500/ton FOB Baltic, and the average price for IDA (monoammonium phosphate, ammophos) FOB Baltic in 2023 was $516/ton. Carbamide fell in price to $230-240/ton FOB Baltic in the fourth quarter. According to Krasnozhenov, China is now the largest fertilizer producer in the world. – Vedomosti) reduces exports of the main types of these products, which supports world prices for fertilizers.

Source: https://www.vedomosti.ru/business/articles/2024/02/09/1019346-minpromtorg-hochet-uprostit-eksport-udobrenii?utm_campaign=newspaper_9_2_2024&utm_medium=email&utm_source=vedomosti