Tight Supply, When Will Global Fertilizer Prices Soar?

Tunisia, which has interrupted the export of phosphates for more than ten years, suddenly announced the resumption of the export of this product recently. What makes the Tunisian government change its mind is the current global demand for fertilizer products, and of course the soaring "price temptation".

On the one hand, the market is rising sharply, and on the other hand, the supply is constantly tightening. Since the Russian-Ukrainian conflict, global nitrogen fertilizer prices have risen by 40% to 50%, while phosphate and potash fertilizer prices have risen by 30%. Taking the price of the main variety of potassium chloride as an example, in March this year, the product rose to US$562 per ton, which was 2.8 times that of the same period last year, the highest increase of the main chemical fertilizer varieties, and the main reason for the soaring price was tight supply.

The world's largest potash fertilizer producer and Canadian fertilizer company Nutrien expects global potash fertilizer shipments to fall to between 60 million tons and 65 million tons this year. In the first quarter of this year, the global fertilizer import volume decreased by 28% year-on-year, mainly due to the limited export of Russia, a major fertilizer exporter, and Belarus, which ranks among the top ten in the world.

It should also be noted that starting from 2021, due to the rising prices of natural gas and other raw materials and the disruption of the global supply chain due to the new crown pneumonia epidemic, international fertilizer prices have ushered in a wave of sharp rises. After the Russia-Ukraine conflict, Western countries imposed sanctions on Russia, and Russia took countermeasures, which made the supply and price of the international fertilizer market even more turbulent.

As an important fertilizer exporter in the world, Russia issued a ban on the export of chemical fertilizers in response to the sanctions imposed by European and American countries on other Russian industries, which directly led to the tight supply of urea and potash fertilizers in the world. Relevant data show that in 2019, Russia's exports of potash fertilizers, nitrogen fertilizers and phosphate fertilizers accounted for 18.66%, 15.47% and 13.68% of the world's total exports, respectively. In addition, Russia's natural gas exports are restricted, which directly affects the production capacity of nitrogen fertilizers and phosphate fertilizers in Europe. Another major exporter of fertilizers, Belarus, also suffered from sanctions from many countries, which greatly affected its fertilizer exports. Under the imbalance between supply and demand, global fertilizer prices will naturally rise. Under the butterfly effect, Vietnam, a rice exporter as far away as Southeast Asia, has also introduced several bans on the export of fertilizers in response to tight supply.

In addition, the obstruction of trade routes is also an important factor affecting the supply of fertilizers. Fertilizers exported from Russia are mainly transported through the Baltic Sea. After the start of the Russian-Ukrainian conflict, many countries ordered the prohibition of Russian-related ships and goods from entering the port. The interruption of the logistics chain caused many shipping companies to suspend their business with Russia.

Industry insiders believe that the trend of high prices in the global fertilizer industry will be difficult to change in the short term. At present, the supply pattern of bulk raw materials and the trend of rising production costs determine that the price of fertilizers may remain fluctuating at a high level. Looking further, the pattern of the future international fertilizer market depends on the one hand when energy prices fall, and on the other hand when Russian fertilizers can return to the international market. In this regard, Nutrien believes that the disrupted situation in the fertilizer market caused by supply disruptions may continue into 2023.