Russia assumes tax obligations and extends quotas: what will happen to exports
By grade According to the Food and Agriculture Organization of the United Nations (FAO), Russia last year ranked first in the world in the export of nitrogen fertilizers, as a result of potash fertilizers and exports of phosphate fertilizers. However, due to Western deviations from deliveries in Russia, the situation worsened from January to August, generally decreased compared to the same period last year, watching food policy research institute (IFPRI) analysts Joseph Glauber and David Laborde.
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Moscow has closed export data since March, but, according to IFPRI analysts’ calculations based on data from open importing countries of Russian fertilizers, the supply of potassium chloride in the first eight months of consumption by 16.5%, carbamide (urea, a fertilizer containing 46% nitrogen) — by 22.8%. The import of ammonia from Russia especially decreased – by 63%, the reason is the closure of the Togliatti-Odessa ammonia pipeline. At the same time, supplies of diammonium phosphate exceed the volumes of the first eight months of 2021 by more than 8%.
Despite the decline in exports, the increase in investment since January 1 export duties on exports. Most likely, they will be introduced in Russia unilaterally and for six months, since for a longer period it is necessary agreement with others usually the Eurasian Economic Union (EAEU).
In October, Finance Minister Anton Siluanov informedthat export obligations are covered if world prices for phosphate and nitrogen fertilizers exceed $500 per ton, and for potash fertilizers – $400 per ton. And in November, Minister of Industry and Trade Denis Manturov said saidthe export duty for all types of settlement is 23.5% if world prices exceed $450 per ton, and the draft resolution has already been prepared.
Duties all manufacturers
By data PhosAgro, the level of average prices for mineral fertilizers in the III quarter of 2022 is higher than the prices for the same period in 2021. The average price for carbamide in the ports of the Baltic Sea is $538 per ton against $442 last year, for ammophos (ammonium phosphate, nitrogen-phosphorus fertilizer, contains 10-12% nitrogen and 44-52% phosphorus) – $777 per ton. on the same basis against 695 dollars, for potassium chloride (potash fertilizer using 58-60% potassium oxide) – 694 dollars against 277 dollars.
“Prices for phosphorus and potash products are gradually declining because they are too high in relation to the prices of agricultural products,” the company said in a report. “Nitrogen fertilizer prices, including carbamide, have followed an uptrend upwards, including due to high energy emissions and in terms of declining production of these types of fertilizers, especially in Europe.”
At current prices, it is likely that the tax will be levied on all types of fertilizers, says Dmitry Puchkarev, an expert on the stock market at BCS Mir Investments.
“Now retail prices for potassium chloride in Europe and the USA are about $850-855 per ton, for urea – $820-825, diammonium phosphate (nitrogen-phosphorus fertilizer using 18% nitrogen and 46% phosphorus) – $820-830 per ton. Compared to prices in the spring-summer of 2022, when they have reached a multi-year age, prices are declining,” says independent expert Leonid Khazanov. “However, at the level of November 2021, prices have not yet expired, although the cost of carbamide is approaching the indicator of the period.” Export prices in Russian ports are presented below retail prices in the west, as they do not include the cost of margins of traders located between producers and users.
“The cut-off price of $450 per ton cannot be considered too high,” says Aleksey Kalachev, an analyst at FG Finam. “Most likely, it became an agreement and a compromise.” Even though emissions prices fell by 20-30% from peak weights, they were still increasing, Kalachev said, only going higher in the fall of 2021, and up until much of the time noted below.
In 2007–2008, the height of a ton is higher only in 2007–2008, and in 2010–2012, the height of the lift is 450 US dollars. Thus, he says, the excess of the cut-off price, according to the intention of the values, will withdraw from the budget the “surplus profits” of fertilizer producers from a successful market situation. The cut-off price will protect producers from an excessive fiscal burden if the environment and prices fall to higher levels of previous years.
Kalachev says that after the introduction of export export rates, producers will depend not only on prices, but also on the share of exports in their revenue. Now the companies do not disclose the geography of sales. In previous years, PhosAgro exported about 70% of its revenue. If the interest rate of 23.5% is levied at a price above $450 per ton, then at the current price, the interest rate will cost the company about 6% of the revenue calculated by the expert.
The Ministry of Industry and Trade does not write that prices for some bases are used as a benchmark, because prices at different bases vary greatly, export analyst for the Otkrytie Investments commodity market Oksana Lukicheva. Pay profit from possible risks to all manufacturers, but first of all to those whose exports turned out to be high – Phosagro, Akron, Eurochem. Uralchem, the main producer of potash fertilizers, had to decrease because exports fell.
Duties, according to Lukicheva, restrict exporters, but do not allow exporting. “The rate of 23.5% is acceptable given the high prices for offers,” the analyst said. “Exports can happen at the level of the previous day or even if the synthesis is broken.”
The introduction of a tax on profits could lead to exports from Russia if prices for mineral resources in the global market continue to decline, Khazanov believes. In such scenarios, the analyst suggests, the productivity of manufacturers is reduced, which provide for a reduction in supplies and revise investment programs. “However, after some time, this is a fall to an increase in prices for mineral resources abroad due to their shortage on the world market, as was the case in the spring-summer of 2022, and domestic chemical companies, loss in tonnage, the danger of catching up in money,” – says Khazanov.
Quotas do not restrict exports
Tariffs are not the only way to regulate food abroad. The government has decided to extend fertilizer export quotas from January 1 to May 31, 2023. proper project resolutions of draft normative legal acts published on the portal. In it, the volume of quotas for export outside the EAEU is set at 7.013 million tons for nitrogen fertilizers and 4.907 million tons for compound fertilizers.
It’s less than it was. From 1 July to 31 December 2022 quotas for nitrogen fertilizers – 8.3 million tons, for impact, two or three elements (nitrogen, phosphorus and potassium) – 5.9 million tons. informed November 21, that a decision has already been made to establish a new quota for the export of special types of nitrogen fertilizers: the quota for the export of carbamide will be increased by 400,000 tons, ammonium nitrate – by 200,000 tons, carbamide-ammonia mixture by 150,000 tons. The corresponding protocol of signing the first Deputy Prime Minister Andrey Belousov. However, even an increase after this quota by 0.75 million tons to 7.763 million tons is less than the current quota for the export of nitrogen fertilizers of 8.3 million tons.
The size of quotas is calculated based on the volume of production, the share of the sector of agricultural and industrial enterprises, according to the clarification of the Ministry of Industry and Trade received by Forbes. According to the letter, the updated version of the report by the Ministry of Agriculture of Russia and the approval of the document by the Ministry of Industry and Trade of Russia provides for in January-May 2023, the load on the agricultural energy sector is 10% higher than the dependence level of the previous year, which affects the reduction in the amount of quota emissions.
The smaller volume of quotas compared to significant quota periods is mainly due to the terms formulated in the clarification. Previously, quotas were introduced for six months – from December 1, 2021 to May 31, 2022 and from July 1, 2022 to December 31, 2022. The protection period proposed by the design resolution is only five months – from January 1 to May 31, 2023. “The final volumes of quotas will be significant in the process of coordinating the draft resolution with interested federal executive authorities and emissions for the joint subcommissions on customs-tariff and non-tariff regulation, protective measures in foreign trade of the Government Commission on Economic Development and Emissions,” writes the Ministry of Industry and Trade.
“In general, export quotas were introduced in the amount of only slightly less than the average export volume for the opposite periods,” says Aleksey Kalachev, an analyst at FG Finam. “They protect the domestic market from the volume of export growth, but almost do not reduce the natural growth of exports.”
The establishment of quotas will only fix the ratio between the sale of mineral products in the Russian market and beyond its external border, given that they can be increased, as it was already in the preferred year, Khazanov says. “In 2023, the amount of the reserve that helps maintain health may increase,” growth expert.
By data The Russian Association of Fertilizer Producers, as of November 16, 2022, increased by 4.85 million tons.
Production of potash fertilizers is falling, nitrogen and phosphorus crops
By data The coverage statistics for the year of emissions of harmful substances is 18.3% compared to the previous year to 1.8 million tons. For 10 months of 2022, the drop in the same period in 2021 was 10.7% with 19.5 million tons produced.
The production of potash fertilizers increased sharply – in 2022 it amounted to 0.5 million tons, which is 44.7% less than last year. For 10 months of 2022, 6.2 million tons of potash fertilizers were produced, which is 30.8% less than in January-October 2021. At the same time, 3.6 million tons of phosphate fertilizers were produced in 10 months of 2022 (+0.6% compared to the same period last year), nitrogen fertilizers – 9.8 million tons (+3.8%).
“The production of phenomena that are not found in all types of plants, but in fact only in the extraction of potassium chloride and potassium-containing mixed fertilizers,” dispenser Kalachev from Finam. – Perhaps this is due to the blocking of the export logistics of Uralkali and Uralchem in the Baltic ports. In this regard, mixed fertilizers containing potassium are registered and produced in the country, while the output of other mixed fertilizers is only increasing.”