Home ›› 06 Mar 2022 ›› Front
Global fertiliser prices – which reached a 12-year high in late 2021 – may increase further this year riding on supply shortages, as the rising fuel prices triggered a lower than usual output across the globe, especially in Europe, USA, and China.
The fuel prices began jumping after Russia’s invasion of Ukraine. Recent forecasts from the World Bank and IndexBox – a market intelligence platform – further mentions self-imposed restrictions in export by larger producers as a key reason behind the global supply shortage.
World Bank data shows that the price of per tonne urea ranged from $305 to $334 in the global market in January of 2015-2017. The price later went down to $219-$265 per tonne in January of 2018-2021.
But the prices suddenly started skyrocketing after that period, reaching $612.5 per tonne in October 2021. According to IndexMundi, urea prices crossed $900 per tonne last November, and then dropped slightly to $846.38 in January 2022.
The price of non-urea fertilisers have also increased. The price of Diammonium phosphate (DAP) was $307.5 per tonne in October 2019 and $357 in October 2020. The price then increased to $672 in October 2021.
Besides, the price of Muriate of Potash (MOP) prices reached $221 in October last year, from $202 just three month earlier.
IndexBox, in its forecast on December 17, projected that the fertiliser prices would climb further in 2022 due to a continued shortage in supply. But if the costs for natural gas maintain their downward trend, it will hold the price increases back,” the research firm had said.
However, the Ukraine-Russia war has already pushed up the fuel prices. The western sanctions on Russia may disrupt gas distribution to Europe, as 40 per cent of the natural gas supply to Europe comes from Russia.
Balai Krishna Hazra, additional secretary at the agriculture ministry, said, “We are concerned about the Ukraine-Russia war. It cannot be said how long the war will rage on. We have already discussed the matter with relevant government officials.
“Some contracts are already completed, and we will not suffer any problems with the fertiliser supply till June this year. Fertilisers cannot be preserved for long periods of time, and we do not have an adequate number of warehouses.”
“We are monitoring the situation, and will take appropriate steps when needed,” he added.
War, lower output and self-restriction
The recent Russia-Ukraine conflict and involvement of Belarus with Russia created an uncertainty as Bangladesh imports a large amount of fertilisers from Belarus and Russia.
Russia supplies 40 per cent of the gas in Europe. The production of fertilisers will decrease further as European countries have already cut down production due to high gas prices. Natural gas accounts for up to 80 per cent of variable costs in the nitrogen fertiliser manufacturing process.
Moreover, China too has announced a suspension on fertiliser exports until June 2022 as escalating thermal coal prices forced fertiliser factories to cut production. China’s exports of DAP and urea account for approximately one-third and one-tenth of global trade, respectively.
Russia recently announced restrictions on nitrogen and phosphate fertiliser exports for six months, effective from December 1, 2021.
Larger subsidy required this year
The government has been offering a big subsidy on fertilisers for years. It gave Tk 7,683.61 crore in subsidies in 2019, Tk 6,875.59 crore in 2020 and Tk 7,717 crore last year. The government increased the subsidy in this sector to Tk 9,500 crore in the current fiscal year.
Agriculture Minister Abdur Razzaque at a recent press conference said Bangladesh still needs Tk 19,000 crore more in subsidy to ensure a sufficient amount of fertilisers for FY22, as prices increased sharply in the international market.
Former director general of the Department of Agricultural Extension Hamidur Rahman said, “There is no scope for reducing investment in Agriculture. The government has to be aware of international market prices.
“If fertiliser prices go up further due to the ongoing global situation, additional subsidies may be required, and the government will have to provide it.”
He added that organic fertilisers are getting popular, and Bangladesh should focus on this method too.
According to the ministry of agriculture, the government procures urea at Tk 96 per kg and subsidises Tk 82 of the price. It provides Tk50 in subsidy per kg for triple super phosphate, Tk 41 for Muriate of Potash, and Tk 79 for decomposed organic phosphorus (DOP).
The government has set the retail price at Tk 14 for per kg of urea, Tk 22 for TSP and Tk 15 for MOP and Tk 16 for DOP. Bangladesh has an annual demand for 57.5 lakh tonnes of fertiliser, and of this figure, 26 lakh tonnes are for urea and the rest are for non-urea.
The country produces around 10 lakh tonnes of urea annually, and the remaining 16 tonnes are imported to meet the annual demand. Bangladesh spends Tk 22 to produce one kg of urea, said officials of the Bangladesh Chemical Industries Corporation (BCIC).
According to Bangladesh Fertiliser Association, its members import 14 lakh tonnes of non-urea annually, which is 40 per cent of local demand. The remaining 60 per cent is imported by Bangladesh Agricultural Development Corporation. BFA’s Executive Secretary Riaz Uddin Ahmed said, “The government will float tender for non-urea fertiliser imports in May this year. Local prices of this type of fertiliser will depend directly on the global prices at that period.
