After 18 years of seemingly endless talks and debates, Russia has finally become a member of the WTO. Its biggest companies have been active in the global market for decades, now they are receiving a fresh impetus for further integration into the world economy. Therefore, the opinion of top managers of Russian companies on global events and trends is likely to be crucial for the development of the world trade.
The accession to the World Trade Club does not automatically guarantee improved trade regime. However, now URALCHEM and other players in the industry will be able to use all the WTO tools to improve the world market’s access to their products.
Today, Russia is one of the five leading exporters of all kinds of fertilizers, with about 8% of the global market. Currently, 60% of nitrogen fertilizers and up to 80% of phosphorus and potassium fertilizers produced in the country are exported. WTO membership will also benefit companies that plan to bring their production methods up to best international practice. Moreover, cancellation of import duties for modern equipment will improve the competitiveness of enterprises.
The need for modernization has been a longstanding issue for Russian manufacturers. Since the days of the Soviet Union, new facilities for the production of mineral fertilizers have been built in the country, and competitiveness of the industry has been primarily supported by low domestic gas prices. Therefore, any significant increase in the cost of raw materials would be a significant blow for the competitiveness of Russian products on the world market, which makes plant modernization a top priority.
More fertilizers needed to feed the world
Food supply has remained the main driver for the global fertilizer market. Food prices, which increased sharply in the second half of 2012, are causing serious concern. Experts talk about a repeat of the food crisis of 2007-2008, which damaged many poor countries and caused numerous civil disturbances.
Among the main reasons for the jump in prices were untimely rains in Brazil and a severe drought in the US. The late start of monsoon rains in Indonesia and droughts in Australia have also played significant roles. Increasing climactic challenges mean that high and good quality crop yield is only possible through intensification of agricultural production. Therefore, farmers need quality fertilizers to increase food production.
In accordance with this trend, the demand for fertilizers will continue to grow. The major areas of demand growth are Latin America, South and East Asia. Domestic competition will strengthen Russians globally.
In the Murmansk region of North-West of Russia, mining of apatite-nepheline ore deposits has begun. The capacity of the new mining and processing enterprise, “Oleniy Ruchey”, will be about 1 million tons of apatite concentrate per year and will increase to 2 million tons per year by 2017. This is the first mining company to be launched after the collapse of the Soviet Union.
The development of the mineral deposits will put an end to one of the main impediments in the Russian fertilizer market, which has held back the expansion of Russian fertilizers manufacturers and weakened their competitive position in the global market. For Russian producers of complex fertilizers, including URALCHEM, apatite is a strategically important raw material in the production of complex and phosphate fertilizers, without which modern high-yield agricultural production can’t exist. But until recently, about 75% of supplies of apatite to the Russian market were controlled by a single supplier.
This kind of monopoly situation in the raw materials market provoked price wars and had a negative impact on the production of fertilizers. Diversification of apatite supplies will allow Russian producers of complex mineral fertilizers to effectively increase supply in order to meet growing world demand.
URALCHEM, OJSC is one of the largest producers of nitrogen and phosphate fertilisers in Russia and the CIS with production capacities of over 2.5 million tonnes of ammonium nitrate, 2.8 million tonnes of ammonia, 0.8 million tonnes of MAP and DAP, 0.8 million tonnes of complex fertilisers and 1.2 million tonnes of urea. URALCHEM, OJSC is the second largest ammonium nitrate producer in the world and number one in Russia, the second largest producer of nitrogen fertilisers in Russia. Key production assets of URALCHEM, OJSC include Azot Branch of URALCHEM, OJSC in Berezniki, Perm Region; OJSC Minudobrenia, Perm; MFP Kirovo Chepetsk Chemical Works, OJSC Branch in Kirovo-Chepetsk, Kirov region; Voskresensk Mineral Fertilisers, OJSC in Voskresensk, Moscow region.
Dmitry Konyaev is Chief Executive Officer of URALCHEM OJSC. Born in 1971. Graduate of Moscow State University (Department of Economics), California State University Hayward (MBA). From 1998 he held a number of senior management positions in Sederrot International AB, Mineral Trading, UralKali Trading SA (Singapore).