New Russian ammonia export terminal met with skepticism by European market

The recently announced ammonia handling facility at the Port Favor terminal in Ust-Luga is part of the Russian efforts to recover market share amid Western sanctions and a reshaping of global energy markets, according to sources heard by S&P Global Commodity Insights.

Ammonia is the starting point for all mineral nitrogen fertilizers, and its production usually requires coal or natural gas. Having large swaths of natural gas reserves, Russia is a big player in this market, but it's facing growing pressure from sanctions after the invasion of Ukraine and the flurry of western sanctions that ensued.

Even though Russian ammonia or its fertilizers aren't sanctioned by the European Union or the US, many buyers prefer to steer clear from Russian products. Adding to that, the ammonia pipeline that starts in the Russian city of Togliatti and ends in the Ukranian city of Odessa, in the Black Sea, was damaged by shelling.

As a result, Russia is looking for new routes to sell its ammonia and announced Dec. 13 that the revamped Port Favor terminal in the Ust-Luga port will be able to handle 1 million tons of ammonia per year. In 2026, Port Favor expects to handle almost 1.5 million tons, according to a report published by the Interfax news agency.

Currently, the terminal is used to ship ammonia produced in the EuroChem Northwest 1 plant, in Kingisepp, but the transportation relies on trucks and vessels that must wait two to three weeks until completed, according to ammonia analyst with S&P Global Commodity Insights Georgy Eliseev. The improved export numbers expected are the result of the conclusion of a railway that will be able to feed ammonia and bulk fertilizers starting May 2025.

Eliseev highlights that Russia was able to supply approximately 4 million metric tons per year of ammonia to the global market, but after the war in Ukraine it lost share and Moscow isn't likely to fully recover it.

"They also have a plan to build a pipeline from Kingisepp to Ust Luga at some point in the future, they got a permission for such construction", said the ammonia analyst.

S&P Global Commodity Insights reached Eurochem for comments on exports from the terminal and its destinations, but received no comment by print time.

Skepticism

A supplier to the European market noted there were only two regular import locations for Russian ammonia currently: LAT Nitrogen, which imports to Rouen, France, and a handful of Turkish buyers.

Market players observed Moroccan fertilizer producer OCP, the world's largest single importer, taking more than 1.5 million mt at Jorf Lasfar in 2023, according to Platts Commodity Insights, and added that OCP did not purchase its ammonia from Eurochem.

"They cannot sell to Europe. It's fine and dandy to have a bigger terminal, but if you can't sell to your natural market, then what are you going to do?" the supplier said.

"Unless I am shown real, true interest from European buyers to take Russian ammonia, unless they show me that, I don't believe it will be of any help," they continued.

A Turkish buyer also expected Europe would continue to steer clear of any Eurochem material. They said it could add downward pricing pressure to Turkey, which along with India is the only marketplace which accepts tons from other sanctioned locations like Venezuela and Iran.

Platts, part of S&P Global Commodity Insights, last assessed Baltic/FSU ammonia at $415-420/mt FOB Dec. 19.

New routes

André Leão, a researcher in the Institute for Strategic Studies in Petroleum, Natural Gas and Biofuels, states this new ammonia export terminal is part of the reshaping of the global energy market that took place as a result of the war in Ukraine.

"After Russia lost a huge share of Europe's gas market, they are looking to diversify their fronts", said Leão, highlighting the EU's 14th sanctions package(opens in a new tab) against Moscow, targeting the country's LNG sector for the first time with a ban on the transshipment of Russian LNG at EU ports for delivery to non-EU markets.

"Russia has been turning mainly to Asia and Latin America to regain ground, and I believe that this ammonia plant is part of that strategy, of being able to increase revenue and exports through another route that will ensure that Russia is able to make these exports", said Leão.