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The Russian government announced a temporary ban on the export of ammonium nitrate last week. The formal ban is understood to have been announced on 31 January with documentation, seen by Profercy, signed by the Russian Prime Minister Mikhail Mishustin and circulated to producers.
The ban came into effect on 2 February and will last until 1 April. Prior to the announcement, reports had been circulating that a ban on AN exports was under discussion. The ban has been driven by the Ministry of Agriculture, following a revision of domestic AN demand for this season, primarily due to favourable weather forecasts.
The latest outright ban follows earlier Russian government export quotas on AN that were equal to roughly 46% of the average exports of AN from Russia between December-May over the last three years. The export allocation for December 2021 to May 2022 was set at 744,000t in total. Of note, the latest ban is in addition to the quotas and does not replace the export quota allocations.
Impact
With the Russian domestic market in full swing, the outright ban is not likely to have a devastating or major market shifting impact on global AN markets.
Indeed, during the Russian domestic season, the other major buyers of AN in Brazil and Latin America are typically in the offseason. However, for those that require only small volumes of AN, the alternatives are few with only fringe producers like Neochim in Bulgaria and Rustavi in Georgia able to supply. Another option actively being explored by buyers in Latin America is replacing AN with ammonium sulphate. The latter is readily available and cfr prices, especially for granular and compacted amsul, have come off sharply in the past week.
The only other major global producer is Europe. However. European nitrate production costs are high and have kept list prices high, while undermining the potential for any export business. Indeed, the situation has kept nitrate values well above those for urea. For example, the list price of AN in France is €755pt FCA, while the highest reported sale for urea in Egypt is $735pt fob (excluding fringe business).
For Europe, the ban outright removes the option of securing volumes from Russia. While Russian AN faces a €32pt tariff on top of the 6.5% duty, during the recent price volatility and production shutdowns in Europe, buyers turned to Russian AN as an alternative. The UK has been a particularly significant buyer of Russian nitrates. Outside of the exceptional situation witnessed in late Q3/Q4 in Europe, Russia has not typically supplied AN to Europe due to the tariffs/duty making business unfeasible.
Post ban/quotas
The major concern for producers is to do with the export quotas lasting until the end of May. The Russian domestic season typically concludes in April, leaving a whole month of restricted export volumes and weak domestic demand. Assuming the quotas are not lifted earlier, once the domestic season is over and the domestic season does not extend into May, then this will create a supply glut which will likely determine the direction and sentiment of international AN values for the following months.
By Michael Samueli, Head of Nitrates and Sulphates, Profercy Nitrogen
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