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Flourishing Russian fertiliser exports amid subdued dry bulk market

The expansion in Russia’s fertiliser exports as well as a shift in trade patterns have increased the dominance of Panamaxes in a traditionally Handysize-dominant Russian fertiliser market.

Fertiliser exports from Russia have been central to global trade concerns amid the war between Russia and Ukraine since February 2022 as fertiliser imports are critical to agrarian economies. While Russia’s continual demand to ease restrictions on its exports paints a dismal picture of trade, fertiliser exports have flourished without substantial impediments.

Russia is the world’s largest exporter of fertilisers. Its ammonia exports took a hit in 2022 as Russian pipeline exports were hampered, but exports of dry bulk fertilisers such as potash, phosphates, sulphur and urea, surged. Russia contributes more than 12% to the global trade of fertilisers in the dry bulk segment, with a share of more than 14% in the total fertiliser shipping demand. The country’s fertiliser exports surged by 13.6% in 2022 and by a whopping 50.5% YoY in January-June 2023.

Brazil, India, the US and China are the largest fertiliser importers in the world, and their share of imports from Russia has been climbing since 2021. While Brazil’s total fertiliser imports shrank in 2022, the share of imports from Russia expanded. The trade with Russia has surged further from 18% in 2022 to 24.5% YTD in 2023.

Meanwhile, as is the case with other commodities, Russia’s fertiliser trade with India and China has strengthened. While the share of India’s fertiliser imports from Russia rose from 5.1% in 2021 to 20.1% in 2023, that of China climbed from 8.5% in 2021 to a whopping 41.3% in 2023.

The rise in Russian exports to Asia has benefitted dry bulk shipping demand due to the added distance. Russia exports fertilisers from primarily three regions- the Baltic Sea, Black Sea and North Sea, with more than 80% of the exports attributed to the ports in the Baltic Sea which is more than 12 thousand nautical miles from Qingdao.

Consequently, the additional long-haul trade has shifted the trade patterns within the shipping segments. Russia has traditionally exported fertilisers in Handysize vessels, but the market is presently dominated by Panamaxes, with the segment now contributing the highest share of exports in the Baltic Sea in 2023, up from the least share in 2021. The rise in the dominance of Panamax vessels is primarily because of an expansion in the long-haul trade between Russia and Asia.

We expect Russia’s fertiliser exports to expand further in 2023 despite challenges. Global sanctions against Russian owners of fertiliser companies and the disconnection of the country from the global payment network SWIFT have not deterred Russian fertilisers to flow into the US, with its YTD share in 2023 having risen to 19.7%, driven largely by buoyant potash imports.

Hence, in all likelihood, Russia will remain an important player in the global fertiliser market despite the competition which will provide some support to a subdued dry bulk market.
Source: Drewry

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