Heat wave spurs ports’ throughput
Following the container volume rise fertilizer cargo is also demonstrating growth trend in freight turnover of Russian ports. Thus, in January-July, 2010 the volume of fertilizer transshipment rose by 33.5%, to 7.26 million tons. In this case, the unusually hot weather gave rise to the fertilizer market boom - the demand for agri-products in the world is growing. And in general the current economic trends are promising for export of the fertilizer cargo.
Somebody loses, somebody gains
2007 year was the record high in fertilizer consumption on the world market, followed by a sharp decline in demand for potash and phosphate fertilizers (nitrogen fertilizers were kept because of their impact on harvests in the short term). But now the pendulum has swung in the opposite direction, as there has been an excess demand for agri-products and in recent months the prices for potash and phosphate fertilizers are up again.
Thus, among the fundamental factors for the future stability of fertilizer consumption are the long-term demand for agri-products in the world and its short-term growth associated with weather condition this summer. Besides, the abnormal hot weather may recur again in the future due to the processes of global climate change and concerns over this may also contribute to the long-term demand for agricultural products.
However, there was a slight decline in prices in the second quarter of 2010, which was associated with the spring sowing season.
According to AzotEkon Company, the total fertilizer production in Russia in the 2nd quarter, 2010 increased by 26% compared with the same period last year, to 4.282 million tons. Production of potassium soared by 98.5% from Q2, 2009, showing the fastest pace, P2O5 production also rose by 17.1%, while production of nitrogen fell 2.6%.
According to EuroChem, a largest Russian producer of mineral fertilizers, in the second quarter of the year average market prices for granular urea (FOB South) amounted to $ 236 per ton, which is 2.6% below the levels of Q2, 2009, while the price of ammonium nitrate (FOB Black Sea) were on average 28% higher, $185 a ton. The phosphate fertilizers price has significantly increased, in particular, the average price of DAP (FOB Baltic Sea) in the 2nd quarter of 2010 was at $439 a ton, 37% above average price in Q2, 2009. Contract prices for potash fertilizers remained stable ($292 a ton, FOB Baltic Sea) during the second quarter of 2010, while spot prices were higher at an average of $339 a ton.
According to Dmitry Strezhnev, EuroChem’s CEO, the second quarter of 2010 turned to be successful against the background of rising prices and volumes. "While short-term economic outlook remains uncertain, we are continuing our growth-oriented investment program, because fundamental prospects of our industry remain very positive for competitive producers. Our projects for the development of potash business is a priority for us", Dmitry Strezhnev said.
Recently, EuroChem had officially announced its plans for the expansion of dry bulk marine terminal at the Russian ports. In particular, EuroChem is going to invest 5 billion rubles in the next three years in the construction of a terminal at the port of Ust-Luga (Leningrad region) to boost the new terminal’s annual throughput to 5 million tons of all kinds of fertilizers (nitrogen, phosphorus, potassium) produced by the company. In 2010 EuroChem intends to launch its own terminal in Tuapse with freight turnover of over 2 million tons a year.
As Alexander Ignatyuk, a Energocapital Investment Group analyst commented in an interview with PortNews IAA, there is an excess demand for agri-products, which could spur the demand for fertilizer by farmers to cover the deficit. "In recent months, prices for potash and phosphate fertilizers are growing. As for drought, it might also have some effect, since producers will try to compensate for the lack of grain yield. It will also boost consumption of mineral fertilizers. So, there are all the preconditions for the growth of this exported cargo," PortNews quoted the expert as saying.
Vitaly Chernov