Russia plans to introduce an 8% duty on the export of all types of fertilizers from Sept. 1 through Dec. 31, 2024, according to an Interfax report this week, citing a government resolution drafted by the Finance Ministry and notes posted on the regulation.gov.ru website.
Russia had implemented export duties at a flat rate of 23.5% on all types of mineral fertilizer export sales priced above $450/mt FOB, effective Jan. 1, 2023 (GM Dec. 9, 2022). For fertilizers priced up to a maximum of $450/mt FOB, the rate of duty is zero. The duties had been set to remain in place through Dec. 31, 2023.
Russian fertilizer producers, notably PJSC PhosAgro, had petitioned the government to adjust the parameters of the export duties implemented on fertilizers from Jan. 1 this year by reducing the price cut-off level (GM Jan. 20, p. 26).
Since the start of the year, the prices of nitrogen and potash fertilizers, which account for more than 60% of Russian fertilizer exports, fell below the $450/mt FOB cut-off price. As a result, according to the report, revenues from the duty amounted to only about RUB6 billion (approximately at $64.3 million current exchange rates).
Furthermore, prices of phosphate fertilizers, except for MAP, and complex fertilizers have also subsequently fallen below the benchmark price, and, according to the sources, the duty effectively has ceased to work.
The Finance Ministry had expected to collect some RUB120 billion from the country’s fertilizer industry under this year’s budget, and the decision to remodel the export duty mechanism has come in order to achieve this budget target. According to the report, citing unnamed sources familiar with the matter, the new measure is expected to raise some RUB87 billion from fertilizer producers for the budget.
According to the report, Russia’s Finance Ministry had also considered an increase in the Mineral Extraction Tax (MET) as well as the introduction of an excise tax on gas. However, fertilizer producers argued against these proposals, saying a further increase in the MET would make it necessary to reduce the extraction of raw materials for the production of fertilizers.
Producers were also opposed to an excise tax on gas, saying this would make the production of a number of nitrogen fertilizers, including ammonium nitrate, unprofitable under current market conditions.
In tandem with the revision of the export duty, the Russian government also plans to replace the current fertilizer export quotas system with export licenses, according to the report, but details are few. These export licenses could be revoked if a company fails to fulfil its obligations to supply the domestic market.
Russia first introduced quotas for the export of nitrogen and complex fertilizers on Dec. 1, 2021, as one of the measures to ensure the domestic market had sufficient supply of fertilizers (GM Nov. 5, 2021). The export restrictions have been extended several times since then.
Most recently, in late May the Russian government green-lighted an extension of quotas on the export of nitrogen fertilizers and certain other fertilizer products for the period June 1 through Nov. 30, 2023 (GM June 2, p. 1). The total volume of export quotas for this period is more than 16.3 million mt.