View of the Klaipeda commercial seaport

Due to Western sanctions, Lithuania terminated the contract for the transit of Belarusian fertilizers in the amount of €1 billion per year. According to experts, Belaruskali will lose a third of its exports. What consequences are expected for world markets and Russia as a result of the decision of Vilnius and how Minsk can solve the problem – in the material of Izvestia.

Why Lithuania terminated the contract with Belaruskali

The Lithuanian government has annulled the agreement on rail transit through the country of potash fertilizers produced by Belaruskali OJSC. The contract will become invalid in two weeks, from February 1.

The state enterprise Lithuanian Railways began cooperation with the Belarusian company in the spring of 2018. It should have been completed no earlier than the end of 2023. Based on the agreement, about 11 million tons of Belarusian fertilizers are transported through Lithuania and the port of Klaipeda per year.

The fact that the Ministry of Transport of Lithuania has prepared a bill prohibiting the transportation of goods from Belarus through the territory of the republic became known on December 10, 2021. This was preceded by sanctions by the United States and a number of other Western countries against Belaruskali, among other things.

View of the Klaipeda commercial seaport

Photo: RIA Novosti / Andrey Alexandrov

During the specified period, the transportation was not suspended, since the Belarusian side in November advanced deliveries for several months in advance. Because of this, Transport Minister Marius Skuodis and Lithuanian Foreign Minister Gabrielius Landsbergis resigned. Prime Minister Ingrida Simonyte rejected their applications.

Lithuanian Railways opposed the independent termination of the contract with the manufacturer, as they were afraid of penalties and saw the risks of bankruptcy because of this. As a result, the government commission for checking transactions of strategic companies announced that the agreement poses a threat to the country’s security.

Vilnius estimated losses from cooperation in the transit and transshipment of mineral fertilizers at €1 billion.

Help “Izvestia”

Belaruskali is one of the largest wholesale producers and exporters of potash mineral fertilizers.

According to the International Fertilizer Association, it accounts for one-fifth of the world’s total.

The main production is represented by six mines and four processing plants. The company was founded in 2013, during its work it has delivered supplies to almost 140 countries of the world.

The Lithuanian direction is one of the key ones for the export of Belarusian fertilizers, through which products are delivered to ports for further transportation by sea.

How to solve the problems of Belaruskali

Transportation to the main importing countries is carried out mainly by sea. Partners, where deliveries can be made by land, account for less than 20% of exports by value. In such a situation, a violation of the existing logistics scheme can create significant difficulties for Belarusian exports, especially in the short term. In any case, transport costs are likely to rise, posing a risk of losing competitiveness, – Alexander Daniltsev, director of the Trade Policy Institute of the National Research University Higher School of Economics, told Izvestia.

The head of the sector of Belarus, Moldova and Ukraine, IMEMO RAS, Elena Kuzmina, called the decision to terminate the contract political and also outlined possible solutions.

The mine of the enterprise “Belaruskali” in the city of Soligorsk, Minsk region

Photo: TASS / Vadim Rymakov

For Lithuania, this is an economically disadvantageous step, because it loses a lot of transit money, says the expert. — First they refused to transport oil products, now fertilizers. There has already been a reduction in the workers of the Lithuanian port, but the consequences will not end there. The railroad will also suffer..

According to her, the largest importers of Belarusian fertilizers are Brazil, India, China, Indonesia and Ukraine. But if you add up the countries of the European Union, the UK, the USA and Ukraine – all those who joined the sanctions against Belarus and this particular company – a third of the export of Belarusian potash fertilizers comes out. In general, this product makes up 10% of the total export of the republic. Reorienting such a volume of the product group, the expert believes, is very difficult, opportunities and time are needed.

Railway cars near waste rock dumps from a mine shaft at the sinking complex of the potash mineral fertilizer manufacturer Belaruskali in the city of Soligorsk, Minsk Region

Railway cars near waste rock dumps from a mine shaft at the sinking complex of the potash mineral fertilizer manufacturer Belaruskali in the city of Soligorsk, Minsk Region

Photo: RIA Novosti / Egor Eremov

Belarus has no access to the sea. To send the goods, it must be transported to the ports of other countries, she noted. — We are talking about Russian ones, such as Ust-Luga in the Kaliningrad region and Murmansk. There should be a sufficient number of bulk terminals. In the first case, they are not. In Murmansk – under construction. For Russia, in this context, it is important that supplies are not one-time, but long-term. Then mutually beneficial cooperation can turn out. Yes, we have our own fertilizer companies. Therefore, the possibility of competing issues cannot be ruled out. But it is known that Russia and Belarus have always managed to reach a consensus.

What will happen to potash prices

Potassium is one of the key components in the production of complex mineral fertilizers. Changes in supply chains affect market conditions. In 2021, prices showed record positive dynamics, mainly due to a jump in world gas prices, since energy raw materials make up the bulk of the cost of ammonia production, ”Elizaveta Utkina, a leading analyst for corporate ratings at the Expert RA agency, told Izvestia.

The cost of nitrogen and phosphate fertilizers on the global market doubled last year by 2020. Potassium chloride has risen in price by 1.5 times. Nitrogen, phosphorus, potassium – by 60%. Phosphate fertilizers on FOB Baltika delivery terms cost $730 per 1 ton, carbamide – $779 per 1 ton, nitrogen-phosphorus – $752 per 1 ton.

Photo: RIA Novosti / Egor Eremov

“Restrictions on the transit route and the negative political situation around a major market player will in any case affect the cost of potash and complex mineral fertilizers,” the expert believes.

Belaruskali is an important supplier on the world market, holding a share of about 15%.

– For this reason restrictive measures against this company could potentially also provoke a shortage of potassium in regions that support the US and EU sanctions, she says. — As a consequence, this will push potash and compound fertilizer prices higher. Foreign producers will have to replace the volumes that they will receive less from Belaruskali. Here, Russian manufacturers may be the winners.

According to Utkina, Belaruskali will redistribute its export volumes to Latin America and Asian markets.

How much potash fertilizer does Russia need

Deputy Director for Science of the All-Russian Research Institute of Agrochemistry named after D.N. Pryanishnikov Alexei Naliukhin, in a commentary to Izvestia, appreciated needs of the Russian market for potash fertilizers.

“Nitrogen, phosphorus and potassium mineral fertilizers cannot be replaced by anything, it’s like food for a person,” he says. – But, Unfortunately, in our country, fertilizers are applied on half of the arable land, while most of it is exported abroad. The price of them in our country has increased significantly over the past year.

According to the doctor of agricultural sciences, the President of Russia has repeatedly raised this issue in a conversation with Russian producers of mineral fertilizers, and outlined the goal of saturating the domestic market.

Potash fertilizers in the warehouse of finished products

Photo: RIA Novosti / Vitaly Timkiv

World statistics show that over the past 40 years, mineral fertilizers have accounted for 40% of the increase in food production. Consumption in 2016 reached 197.5 million tons.

Naliukhin notes that in the main agricultural regions of Russia, the volumes of application are not comparable with world practice. The national average remains at a low level. In the EU this figure is 130 kg/ha, in Latin America 90 kg/ha, in China 440 kg/ha, in Belgium 276 kg/ha, in Germany 199 kg/ha, in the USA 134 kg/ha . Russia is 1.8–2 times inferior to the world average (about 100 kg/ha). As a rule, in those states where the highest yields are obtained, mineral fertilizers are used in large volumes.

“Using modern approaches to regulating plant nutrition, while maintaining soil fertility through the use of fertilizers, Russia can double the gross grain harvest, fully providing the population, and significantly increase its export potential,” summed up Naliukhin.

Leave a Reply