Speaking at a Friday meeting devoted to the domestic mineral fertilizer market, First Deputy Prime Minister Viktor Zubkov stated that the Russian government had considered raising the export duties on mineral fertilizers by 2x to 3x unless producers agreed on affordable prices with farmers, Interfax announced. According to Zubkov, prices on compound fertilizers have surged by 70% since the start of this year, apparently, mainly due to money grabbing rather than growing domestic demand for fertilizers. In his turn, Deputy Industry and Trade Minister Denis Manturov stated that the existing duties on mineral fertilizers would remain unchanged for some time, but ‘everything will depend on a mechanism of interaction between farmers and mineral fertilizer producers'. He also stated plans to draft an agreement between fertilizer producers and the Agrarian Ministry by October 1, which would specify a formula for the calculation of mineral fertilizer prices for the period until 2012.
Last March, the Russian government approved a 5% export duty on potash fertilizer and an 8.5% export duty on compound and nitrate fertilizers with the aim of stimulating demand and decreasing prices on the domestic mineral fertilizer market.
We should note that some of the statements made by the first deputy prime minister look strange given that most of the mineral fertilizer producers have already agreed with farmers on long-term mineral fertilizer supplies at minimum possible prices. In particular, Uralkali has agreed with compound fertilizer producers Eurochem and Fosagro, its Russian consumers, on keeping the potassium chloride prices for domestic farmers unchanged at RUB 3,500 per ton until the end of this year. The price of potassium chloride for direct shipments to farmers is to be retained at RUB 3,000 per ton. In the meantime, prices on some of Uralkali export-bound products reach USD 1,000 per ton.
In our opinion, the likelihood that the export duties on mineral fertilizers could be markedly increased is low, while the main goal of the statements is to force mineral fertilizer producers to set more realistic prices on the domestic market, taking into account the interests of farmers. However, these statements have undoubtedly created a pessimistic backdrop in the mineral fertilizer sector, which is having a negative impact on quotations for shares of mineral fertilizer producers. We believe that the mineral fertilizer sector holds fundamental appeal for investors at the present moment, given favorable price trends on the markets and plans to keep export duties on mineral fertilizers unchanged. Should export duties actually be increased, this would undoubtedly take a toll on the attractiveness of the sector.
0.569
0.073
