Explainer: How the UN plan to export Russian ammonia can help the global fertilizer market

Explainer: How the UN plan to export Russian ammonia can help the global fertilizer market

A truck near a grain terminal harvests barley in the Odessa region as the Russian offensive into Ukraine continues, Ukraine June 23, 2022. REUTERS/Igor Tkachenko/File photo

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  • This content was produced in Russia, where the law restricts coverage of Russian military operations in Ukraine.

MOSCOW, Sep 14 (Reuters) – A United Nations proposal to resume Russian ammonia exports via Ukraine has raised hopes that global fertilizer shortages can be alleviated, which in turn will alleviate global food shortages exacerbated by the conflict in Ukraine. read more

PIPELINE

The United Nations has proposed that gaseous ammonia owned by Russian fertilizer maker Uralchem ​​be piped to the Ukrainian border, where US-based trader Trammo would buy it.

The pipeline is designed to transport up to 2.5 million tons of ammonia per year from the Russian Volga region to the Ukrainian Black Sea port of Yuzhny, known in Russian as Yuzhny, near Odessa. It was closed after Russia moved its troops into Ukraine on February 24.

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Part of the pipeline passes through the Mykolaiv region in Ukraine, where shelling occurs regularly, although it has managed to escape any damage to date. read more

“So far, not a single fragment has hit the pipeline,” said a Russian source close to the talks.

FERTILIZER MARKET

Ammonia is a key ingredient in the production of nitrate fertilizers, which farmers, including wheat growers, need when planting in the fall and spring for good yields and protein content.

The sharp rise in gas prices in Europe has provoked a global shortage of nitrogen fertilizers. The Russian fertilizer industry estimates that up to 70% of European ammonia plants have suspended or reduced production.

Farmers in France are now 20 percentage points behind their fertilizer coverage levels seen a year ago and are worried about the 2023 harvest.

DELIVERY FROM RUSSIA

Western sanctions imposed on Moscow since February 24 did not directly affect fertilizer exports, but Russian producers have lost access to the Baltic Sea ports they used along with the pipeline to ship their ammonia.

Uralchem ​​is considering building an export terminal for ammonia at the Russian port of Taman on the Black Sea, but this will take more than a year.

Previously, Russia exported 4.4 million tons of ammonia per year, which is 20% of world shipping. 2.5 million tons passed through the pipeline, 1.9 million tons passed through the ports of the Baltic Sea.

Russian ammonia used to go mainly to fertilizer producers in Morocco, Turkey, Southeast Asia and Africa, whose production the United Nations is seeking to restore to alleviate the global food crisis.

WHAT’S NEXT?

The ammonia is part of a UN-brokered deal Ukraine, Russia and Turkey signed in July to restore grain exports from Ukraine’s Black Sea ports that Russia has blocked. However, the pipeline was not publicly mentioned until this week.

Moscow’s consent is needed to extend the deal beyond the end of November, allowing it to export ammonia.

UN Secretary-General António Guterres said on Wednesday after a phone call with Russian President Vladimir Putin that it was “absolutely necessary” to overcome barriers to Russian fertilizer exports.

“There is no solution to the global food crisis without full global access to Ukrainian food and Russian food and fertilizer,” he told reporters in Lvov last month. read more

Last week, Putin complained about the deal, saying that Russian fertilizer exports continued to be hindered. He is due to discuss the deal with Turkish President Tayyip Erdogan on Friday. read more

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Reporting by Pauline Devitt; Editing Katherine Evans

Our standards: Thomson Reuters Trust Principles.

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