Finnish naval officers told the media that Finland has applied to join NATO, and the visit of the warships of the three countries is a sign of support for Finland. In addition, the Finnish Ministry of Defense said on the 28th that Finland plans to increase the number of international military exercises.
3. Tropical Storm Agatha formed in the waters off Mexico and will strengthen into a hurricane
On May 28, local time, the NATIONAL HURRICANE CENTER issued a forecast that the first tropical storm in the Pacific region in 2022, "Agatha", formed near the southern coast of Mexico on the 28th, and is expected to strengthen into a hurricane on the 29th and affect the Central American region.
The National Hurricane Center said: "Agatha is expected to strengthen further in the next 12 to 24 hours, and is expected to be a strong hurricane when it reaches the southern coast of Mexico on Monday." Hurricane warnings have been issued in parts of mexico's Oaxaca coast, and the local civil defense department said 200 shelters have been set up along the coast, accommodating 26,000 people. About 5,000 tourists are expected to be in the affected area.
The National Hurricane Center said it expects the hurricane to bring heavy rainfall to the southern Mexican states of Oaxaca, Chiapas and Guerrero, potentially triggering flash floods and mudslides.
The two countries quarreled, and the "grain of grain" suffered
Futures Daily reporter learned that Russia, Ukraine is the main fertilizer exporters in the global market, especially Russia, in the urea and potash fertilizers occupy an important position in world trade.
At present, the global urea production capacity is about 227 million tons, of which the Russian urea production capacity is 11.39 million tons, accounting for 5.03%, and the Ukrainian urea production capacity is 4.166 million tons, accounting for 1.83%. As a major exporter of urea, Russia exported urea 7.292 million tons and 6.97 million tons in 2020 and 2021, respectively, and exported a total of 42.43 million tons of fertilizers in 2021, accounting for 17% of the total export volume of fertilizers. Ukraine also occupies an important position as one of the important exporters of urea. As far as potash fertilizer is concerned, the global potash production capacity and production are concentrated in Canada, Russia and Belarus.
Historically, in 2020, Russia and Belarus produced 7.6 million tonnes and 7.3 million tonnes respectively, accounting for 18% and 17% of global production. With a high concentration of the global potash industry, Russia, as one of the main producing areas, occupies an important position in the global fertilizer trade.
According to the statistics of China Chemical Information, in 2021, the main export countries of global fertilizers are Russia, China, Canada, the United States, and Morocco; the main import countries of global fertilizer products are Brazil, the United States, India, China, France, Indonesia, etc. Global fertilizer imports remained at around 57 million tonnes in each quarter of 2020 and 2021, up 3.6% year-on-year compared to the quarterly average of 55 million tonnes in 2019. The COVID-19 pandemic has made countries pay more attention to food security issues, and imports have not fallen but have risen. In the first quarter of 2022, global fertilizer imports fell by 28% year-on-year, mainly due to the restriction of fertilizer exports from Russia, which is the largest exporter of fertilizers, and Belarus, the top ten fertilizer exporters.
It can be seen that since the Russian-Ukrainian conflict, Russia has issued a ban on fertilizer exports in response to western sanctions on other industries, which has directly led to a global supply of urea and potash.
"The international fertilizer supply is tight, and the most direct manifestation is the sharp rise in the price of the international market. As far as the Middle East is concerned, the FOB price of paper goods, the lowest price before the Russian-Ukrainian conflict was about 600 US dollars / ton, and after the conflict rose to 1015 US dollars / ton. At the same time, some countries have also issued some bans on the export of fertilizers in response to the tight supply situation, such as Vietnam. "Cai Yingchao, a urea analyst at Qisheng Futures, said that Russia's total exports of fertilizers in 2021 will be 42.43 million tons, and the export trade volume of fertilizers will account for 17% of the total global trade." After the implementation of its export ban, it has caused a rapid rise in global nitrogen, phosphorus and potassium prices, which has directly led to the rise in the cost of global grain cultivation, and caused a certain supply shortage in the first half of the northern hemisphere fertilizer season. ”
Affected by export quota policies and maritime restrictions, Russia's fertilizer exports have declined, while the restrictions on Russian natural gas exports will also affect the operating rate of European production capacities such as synthetic ammonia, urea and ammonium phosphate.
From the perspective of new capacity, the new capacity of potash fertilizer in 2022 mainly comes from Russia, Belarus and Laos. There may be great uncertainty about the impact of the Russian-Ukrainian conflict between the 2.3 million tons of new production capacity in Russia and 1.5 million tons in Belarus. The new phosphate fertilizer capacity is mainly for the Morocco OCP capacity expansion plan, OCP plans to increase the annual average annual 1 million tons of granular phosphate fertilizer production capacity from 2020 to 2027. According to IFA forecasts, the new urea capacity in 2022 will be 4 million tons, mainly from Nigeria, Brunei, India and other places.
"On the supply side, global fertilizer production has not changed much for the time being, but it is worth paying attention to the start of production capacity in Europe in the later stage." Industry insiders said that the urea production capacity in Europe exceeds 10 million tons, and russia's supply of natural gas in Europe under the Russian-Ukrainian conflict will cause a shortage of natural gas supply in Europe in the winter, resulting in the suspension or reduction of urea plants in Europe, which in turn will make the international urea supply tense again.
From the demand side, affected by the new crown epidemic and the Russian-Ukrainian conflict, the global food security problem has become more and more prominent, and countries have paid more attention to the guarantee of their own food security. With the rise of global food prices, the agricultural boom has increased, the enthusiasm of farmers to plant is also improving, and the global demand for fertilizers is rising steadily. According to ifA forecasts, global fertilizer demand growth is expected to reach 2.9% in 2022.
Ukraine and Russia have long been important food exporters to Europe and the world. According to statistics, the export volume of wheat and corn in Russia and Ukraine accounted for 25% and 13% of the global export trade respectively, and it is an important "granary" in the world.
According to Wu Zhiqiao, senior researcher of Green Dahua Futures, since the Conflict between Russia and Ukraine, the main grain supply has been interrupted, crop prices have continued to rise, and the rise in commodity prices represented by wheat and corn has stimulated the enthusiasm of farmers to grow grain, thereby increasing the demand for chemical fertilizers.
On March 10 this year, Russia's Ministry of Industry said it would ban the export of fertilizers to "unfriendly" countries. Belarus said the European Union and Canada required restrictions on their exports with potassium content (K2O) below 40 percent or more than 62 percent.
"The EU's imposition of fertilizer export sanctions on Russia is also exacerbating the continued tension of fertilizers in the world, with superimposed transportation being blocked and the gap between global fertilizer supply and demand widening." Wu Zhiqiao said.
The "port closure" embargo restricted The export of chemical fertilizers from Russia was restricted
At present, the Black Sea region is one of the focal points of the Russian-Ukrainian conflict, and the port trade and ship navigation in the region have been affected, transportation has been blocked, and Russian fertilizer exports have also been greatly affected.
It is understood that Russia's fertilizer is mainly transported through the Baltic Sea, and after the Russian-Ukrainian conflict began, many countries ordered a ban on Russian-related ships and goods entering the port. Due to the interruption of the logistics chain, a number of leading shipping companies have suspended their business with Russia. Maersk and Mediterranean Shipping, the world's top two container shipping companies, announced on March 1, 2022, that they were suspending all other orders for goods entering and leaving Russia except for food, medical and humanitarian supplies. Russia can transport potash fertilizer to China through the China-Europe express train, but it has disadvantages compared with shipping in terms of transportation costs and transportation capacity.
In this regard, Wu Zhiqiao said that from the perspective of logistics and transportation, the Russian-Ukrainian conflict has led to the impact of the main fertilizer export ports of Russia and Ukraine, such as the reduction of the volume of goods and goods in the yuri port, and to a certain extent, it has led to an increase in freight costs, resulting in an increase in the cost of landing in importing countries. From the current land transport point of view, although Russia and China have carried out more potash fertilizer border trade, land transport can not effectively replace the role of maritime transport, and the transport capacity is greatly reduced compared with shipping.
Belarus is the third largest producer of potash fertilizers in the world, exporting 12.5 million tonnes of potash fertilizers per year. From 1 February 2021, EU sanctions have led to an embargo on its rail transport, and it will take several months for trans-shipments through Russian ports to return to normal levels, while other shipping routes will increase to transport costs in Asian demand countries.
The European Union imposes a ban on the purchase, import or transfer of Russian fertilizer products (including potassium chloride), and since July 10 this year, the import of fertilizers from Russia needs to pass the annual quota review, and the eu's annual quota for the purchase of Russian potassium chloride is 837,570 tons, which means that the EU will reduce the import of Russian fertilizer products by 1/3.
Regarding export quotas, in fact, at the beginning of November 2021, the Russian government has imposed a six-month restriction on fertilizer exports in the form of quotas, that is, from December 1, 2021 to the end of May 2022.
On April 17, 2022, Russia eased export restrictions on mineral fertilizers, and by the end of May, the export quota of Russian mineral fertilizer producers will temporarily increase by nearly 700,000 tons.
Russia's current export quota for nitrogen fertilizers is about 5.7 million tons (an increase of 231,000 tons) and the export quota for phosphorus (compound) fertilizers is about 5.6 million tons (an increase of 466,000 tons).
On April 27, 2022, Russia extended the quota mechanism for fertilizer exports to August 31 and proposed the possibility of extending the restriction on a quarterly basis.
From the perspective of trade flows, Brazil, India and the United States are the world's major fertilizer importers, while Belarus, Canada, China and Russia are major fertilizer exporters, and logistics and transportation are essential for transporting fertilizers around the world.
Russia accounts for 17 percent of global potash exports, while Belarus (23 percent of exports) already faces sanctions, and 40 percent of the world's potash trade could be at risk of disruption due to the transit blockade unable to export fertilizer products.
"Russia is the largest exporter of urea, nearly 40% of exports to Europe and North America, if the Russian-Ukrainian conflict continues, Russian urea exports to Europe and North America will face disruption, this part may flow to emerging markets such as India, while the supply of goods in the Middle East is expected to turn to the United States and European markets." China and Morocco export 3-4 times more phosphate fertilizers than Russia, and if Russian supplies are interrupted, global phosphate trade may face a readjustment. Wu Zhiqiao said.
China and India, as the main fertilizer demand areas, will negotiate potash contracts with Russia every year.
"From the perspective of India's import source countries in 2022, from January to March, Russia still occupies the fifth position, the top four are Oman, the United Arab Emirates, cartels, and Saudi Arabia. From the perspective of April, Russia is no longer within the main source countries of imports, which to some extent shows that after Russia implemented the export embargo, India is seeking other sources of goods other than Russia to gradually replace its dependence on Russia. Wu Zhiqiao said.
Solution: Russian-Ukrainian fertilizers return to the market?
Recently, the world's largest potash producer, Canadian fertilizer giant Nutrien, warned that the trend of supply disruptions that has led to chaos in the fertilizer market may continue beyond 2022. Nutrien expects global potash shipments to fall to 60 million tonnes to 65 million tonnes in 2022.
Another fertilizer giant, Mosaic, expects the potash market to continue to be tight for the foreseeable future. Mosaic CEO York? Joc O'Rourke said on May 3: "Maybe it will be a two-year problem, and even then, the gap will take two to four years to catch up." ”
For the world's major fertilizer demanders, it is particularly important to ensure the stability of fertilizer supply at present, which is related to food security.
As of January 2022, all fertilizer stocks in India fell by 45%-78% year-on-year. In order to ensure the supply of domestic fertilizers, India actively replenishes the reservoir through bidding.
According to statistics, since the beginning of this year, India has issued a total of 5 tenders for urea imports, with a total of 9.062 million tons of bids. Separately, India is negotiating a multi-year fertilizer supply agreement with Russia to buy 1 million tons of potash and phosphate fertilizers and 8 million tons of nitrogen fertilizers, and the country is also negotiating with Belarus to buy them.
"The first tender for fertilizers in India in the first half of 2022 was slightly earlier than the same period in 2021, and as of early May, the cumulative total number of tenders has exceeded the same period last year. In order to ensure its fertilizer supply, India on the one hand to increase domestic fertilizer production, taking urea as an example, India's domestic urea production in January-April 2022 increased by 10% over the same period last year; on the other hand, India actively contacted Countries such as Jordan, Morocco and Canada to expand the alternative import sources of potash and phosphate fertilizers, and hoped to reach a long-term agreement with Russia to obtain more preferential prices. Yao Yao, a researcher at Xinhu Futures Energy, said.
"In the face of tight supply, the mainland's approach is to ensure stable supply and price, relax the constraints on the production of fertilizer enterprises, increase the operating rate, and restrict the export of chemical fertilizers." But this applies only to countries with productive capacity. For countries with a large capacity gap such as India, they can only increase the scale of procurement in the international market and increase domestic subsidies. "Guantong Futures analyst Yan Sensheng said that on April 27, the Indian government raised fertilizer subsidies for the autumn harvest season of the new fiscal year from Rs 210 billion to Rs 609.4 billion (about 52.52 billion yuan), which is 6.6% higher than the 571.5 billion rupees subsidy for the whole year of 2021/2022." This makes the contradiction between supply and demand in the international market intensify, driving up procurement costs, and increasing the pressure on some countries with weak financial strength. ”
Respondents generally believe that the core of the current changes in the international fertilizer market lies in when the Russian-Ukrainian conflict ends and when the economic sanctions against Russia end, so that energy prices will fall; on the other hand, when Russian fertilizers can return to the international market.
In terms of the current UN involvement, food security has become a global issue. Global fertilizers are inseparable from Russia, especially in potash fertilizers.
"From Russia's attitude, there are great powers that are willing to assume their own international obligations, but only if they lift the measures imposed on it by the West for political purposes, especially in the area of energy embargoes." At the same time, it also expresses Russia's tough attitude towards the issue of fertilizer ban, and it can also be seen that only negotiations between the West and Russia can finally solve the problem of Russian fertilizer returning to the international market. Cai Yingchao said.
He said that with the easing of the Conflict between Russia and Ukraine in the later period, the international fertilizer supply tension may have improved greatly. First, energy prices may fall rapidly, thereby reducing the cost of international fertilizer production, especially if the relationship between Europe and Russia is eased, natural gas can be effectively supplied, and the possibility of urea companies stopping production due to natural gas supply in the later period will be greatly reduced. Second, the return of fertilizers from Russia and Ukraine to the international market will make the international fertilizer market once again tend to the original balance, coupled with the future production of new fertilizer plants in other regions, the supply tension will be effectively alleviated.
This article originated from Futures Daily
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