Seeking Alpha
Contrarian, newsletter provider, commodities, industrials
Profile| Send Message|
( followers)  

Summary

  • Russia, Ukraine and Romania export ammonia and UAN solutions to the US every year.
  • US and international ammonia and UAN producers would benefit from sanctions against Russia.
  • Key Russian ammonia export pipeline bisects Ukraine and ends at the Odessa port terminal.

Russia and Ukraine exported a combined 750,000 to 1 million tons anhydrous ammonia to the US over the past four years.

In January, 2014, there were no ammonia exports to the US from these countries, but this could have been due to the slack demand for fertilizers at this time, as so far, no fertilizer port disruptions in the Black Sea have been reported.

U.S. Ammonia Imports for Consumption

Annual + Year-To-Date Data from January 2013 - January 2014

Quantity Description Country 2010 2011 2012 2013 2013 YTD 2014 YTD Percent Change
YTD2013 - YTD2014
In 1,000 Units of Quantity
metric tons Trin & Tobago 4,453 3,773 3,770 3,460 304 236 -22.6%
. Canada 1,012 1,161 1,129 1,213 118 85 -27.6%
. Ukraine 478 588 303 461 64 0 -100.0%
. Russia 281 546 538 430 98 0 -100.0%
. Venezuela 88 234 206 156 25 38 53.5%
. Saudi Arabia 0 57 117 79 0 0 N/A
. Indonesia 36 42 57 45 0 0 N/A
. Mexico 55 31 86 40 0 0 N/A
. Latvia 76 38 0 35 0 0 N/A
. Estonia 46 109 0 30 13 0 -100.0%
. Brazil 34 13 7 25 0 0 N/A
. Colombia 27 5 6 23 0 6 N/A
. Argentina 0 0 0 15 0 0 N/A
. Switzerland 0 0 0 10 0 0 N/A
. Cayman Is 0 0 0 6 6 0 -100.0%
. Korea 1 5 4 3 0 0 7,900.0%
. Germany 0 0 0 0 0 0 N/A
. Taiwan 0 1 0 0 0 0 N/A
. Japan 0 9 0 0 0 0 N/A
. Belgium 0 1 0 0 0 0 N/A
. Turkey 0 35 23 0 0 0 N/A
. United Kingdom 0 0 0 0 0 0 N/A
. China 0 0 0 0 0 0 N/A
. Egypt 90 162 49 0 0 0 N/A
. Libya 20 0 0 0 0 0 N/A
. Oman 47 0 0 0 0 0 N/A
Subtotal metric tons 6,742 6,811 6,295 6,032 628 365 -41.9%

Source: US International Trade Commission

Russia also exports Urea Ammonium Nitrate or UAN solutions to the US. In 2013, UAN exports reached 1.19 million tons.

U.S. UAN Solution Imports for Consumption

Annual + Year-To-Date Data from January 2013 - January 2014

Quantity Description Country 2010 2011 2012 2013 2013 YTD 2014 YTD Percent Change
YTD2013 - YTD2014
In 1,000 Units of Quantity
metric tons Russia 679 611 681 1,193 70 135 91.1%
. Trin & Tobago 446 916 773 652 67 54 -19.4%
. Egypt 111 106 200 332 0 34 N/A
. Canada 396 560 365 302 19 29 55.6%
. Romania 230 442 258 216 35 0 -100.0%
. Netherlands 40 130 130 169 53 9 -82.8%
. Lithuania 72 443 359 108 63 0 -100.0%
. Germany 27 138 73 100 13 0 -100.0%
. Bulgaria 30 19 99 49 0 0 N/A
. Poland 0 0 0 38 0 0 N/A
. Turkey 0 0 42 0 0 0 N/A
. Suriname 0 0 0 0 0 0 N/A
. Oman 0 0 30 0 0 0 N/A
. India 0 0 0 0 0 0 N/A
. Algeria 0 9 0 0 0 0 N/A
. Ireland 1 3 3 0 0 0 N/A
. Saudi Arabia 0 6 0 0 0 0 N/A
. Estonia 106 83 0 0 0 0 N/A
. Mexico 0 0 0 0 0 0 N/A
. Ukraine 67 27 0 0 0 0 N/A
Subtotal metric tons 2,206 3,495 3,011 3,161 320 261 -18.5%

Russia and Ukraine are both members of the World Trade Organization and trade sanctions would be prohibited against either.

However, if US general trade sanctions against Russia were instituted due to the invasion of the Crimea, the US Gulf Coast market for ammonia and UAN could tighten.

Other ammonia and UAN suppliers in, or exporting to the USGC, particularly those operating in Trinidad & Tobago, might capitalize on such a market tightening. These include CF Industries Holdings (NYSE:CF), Yara International (OTCPK:YARIY) and OCI Partners (NYSE:OCIP).

Likely in-land beneficiaries of a tightening in Gulf ammonia and UAN prices would also include Terra Nitrogen LP (NYSE:TNH), CVR Partners (NYSE:UAN) and Agrium Inc. (NYSE:AGU) at its Borger, Texas, plant and from its export-oriented urea operation MOPCO in Egypt.

The main ammonia export pipeline from Russia begins in Tolyatti in Central Russia and ends in Ukraine at Odessa on the Black Sea, about 2000 km away.

The Ukrainian portion of the pipeline is administered by the state company Urktransammiaka, which in January 2012 curtailed receipt of ammonia and almost forced the shut down of Togliattiazot, one of the largest ammonia plant complexes in Russia. The Ukrainians said ToAz had over-delivered on its quota in 2011. The pipeline shipped 1.68 million tons of ammonia in 2011.

The Odessa port also contains a state owned and major ammonia and urea plant complex with theoretical annual capacities of 3.4 million tons ammonia and 2.5 million tons of urea. The Togliatti-Odessa pipeline has a side branch which connects the Gorlovka plant of the largest Ukrainian private producer, Group DF. The Gorlovka plant was the scene of a multi-fatality ammonia accident last August.

The Ukrainian ammonia plants of Odessa and Group DF are obviously dependent on the uninterrupted supply of cheap Russian natural gas to operate. Here is a map of the natural gas pipelines that enter Ukraine from Russia and exit to supply countries to the west and south.

The Russian natural gas supplier Gazprom (OTCPK:OGZPY) has indicated the price of gas to the Ukraine will go up to $368/ton next quarter from the recently discounted $268/ton price, and could be cut off completely if the Ukrainians do pay their alleged $2 billion natural gas debt.

Overall, the probability of US trade sanctions against Russia must be balanced against the damage it would cause US exporters to and US investors in Russia. For example, Russia is a significant destination for US poultry exports. According to Agrimoney, Russia is also a major importer of beef and pork.

However, any disruption to the flow of natural gas to the Ukraine, or ammonia through the Togliatti-Odessa pipeline, could tighten world ammonia markets. In particular, the Odessa port nitrogen plant, and important fertilizer export terminals at Yuzhny and Nikolaev, are necessary for Ukrainian exports, and are vulnerable to disruption.

Source: Russian And Ukrainian Nitrogen Exports Vulnerable