The situation in the energy industry led to an increase in demand for nitrogen fertilizers by 15-20%.
The head of the Ostchem RETAiL department, Yevhen Khurylenko has announced this, the Ukrainian News agency reports.
"In May and June, we saw an increase in demand that is uncharacteristic for the low season - about 15-20% higher than usual for this period. Moreover, not only small and medium-sized farmers, but also large players are actively contracting for the fall," Khurylenko noted.
In his opinion, such an atypical surge in demand is associated with a number of factors, including the rise in grain prices and the emergence of additional resources for the purchase of fertilizers by farmers, a decrease in the prices of basic fertilizers, the disruption of the logistics chains of importers, as well as the situation in the Ukrainian electric power industry.
"The key factor is the sharp rise in grain prices and the corresponding increase in farmers' incomes. In the last month alone, the price of grain has risen by 25%, which has allowed many farmers to obtain additional funds for the purchase of fertilizers... About 30% of our deals on the sale of fertilizers - this is the grain exchange programs. The second factor that triggered the activation of demand is the seasonal decrease in selling prices for nitrogen fertilizers, which is associated with acceptable gas prices in May," Khurylenko said.
He specified that about half of Ostchem's sales are ammonium nitrate, another 50% are UAM and urea (in the ratio of 60% to 40%).
Khurylenko emphasized that in June the demand for nitrogen fertilizers continued to grow due to the emergence of new factors that activate the market and change the supply structure.
"The logistics chains of major fertilizer importers have broken down. We know that contracts have been disrupted, as many drivers refused to go on international flights due to the risks of mobilization at customs. We also see how the Poles have again started to block the roads to the EU. Fertilizer imports have become less reliable, more expensive," Khurylenko summarized.
He emphasized that in the future, a new determining factor that will significantly affect the fertilizer market will be the situation in the Ukrainian energy sector and the dynamics of energy prices.
"Electricity accounts for 10% of the cost of fertilizers, gas - about 70%. The two-fold increase in electricity prices in Ukraine and the renewed increase in gas prices in the EU have already formed quite clear expectations among farmers regarding the cost of fertilizers for the next season. Farmers understand that the drop in prices on nitrogen fertilizers is unlikely in the near future. In addition, the risks of blackouts are added. Everyone understands that the summer will be even more difficult. Trying to insure themselves against the instability of the agricultural markets, they are already making prepayments by purchasing fertilizers in advance. The fertilizer market is only restrained from significant growth by the fact that farmers are still severely limited in working capital," Khurylenko added.
As the Ukrainian News agency earlier reported, in the 1st quarter Ostchem increased the production of fertilizers by 1% to 0.5 million tons.
In 2023, Ostchem enterprises increased the production of fertilizers by 19.5% to 2.1 million tons.
The Ostchem holding unites the nitrogen chemistry enterprises of Group DF.
Group DF is a diversified international group of companies whose business is represented in 11 countries in Europe and Asia.
The main areas of activity of the group are nitrogen, titanium and gas businesses.
The founder and owner of Group DF is businessman Dmytro Firtash.
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