In the last few days, mineral fertilizers have increased in price in Ukraine. Thus, the market reacted to an inquiry initiated last week by the Interagency Commission for International Trade (hereinafter - Commission) on the import into Ukraine of nitrogen and mineral fertilizers from any country. This was stated at the press conference by Andriy Dykun, the chairman of the Public Union “Ukrainian Agri Council”.

Currently, fertilizers from EU countries, the Persian Gulf, North Africa, the CIS, as well as Turkey, Kazakhstan, Belarus, Georgia, China, USA, etc. are being imported into Ukraine.

“The worst part about this situation is that certain restrictions on the supply of fertilizers from other countries can be imposed from the beginning of the investigation. It could be today or tomorrow. Each batch of fertilizers in Ukraine will need to be approved by the Ministry of Economy. And this, of course, is a corruption component. After all, the decision - to allow or not - will depend on the officials. The need to go through such paper procedures greatly impedes the supply of fertilizers to Ukraine. And, of course, this situation will worsen relations with other countries. And the new Government will have to deal with the complaints of our partner countries,” said Andriy Dykun.

Dmitry Firtash’s “Ostchem” company initiated this investigation. Already in the course of the investigation, preliminary measures may be applied: the import surveillance regime, which is, in fact, a quota, or additional duties, up to 20% or more. Or both. And according to the results of the investigation, quotas for the supply of fertilizers from other countries and / or duties can be introduced for at least 4 years.

Restricting imports of fertilizers will lead to a shortage in the market and, accordingly, a rise in prices. Moreover, the deficit is inevitable, as today Ukrainian chemical companies will not be able to cover even the need of the agricultural sector of Ukraine in two- and three-component fertilizers containing nitrogen, phosphorus and potassium even at 100% loading. Their maximum potential capacity is 450 thousand tons, the real capacity is about 150 thousand tons, and the annual demand is more than 1.8 million tons.

Also, restrictions on imports of fertilizers will lead to even more monopolization of the market. After all, the main producer of fertilizers in Ukraine is “Ostchem” company. The AMCU has already confirmed the existence of facts that can testify to the abuse of the monopoly position of Ostchem. Therefore, restricting the import of fertilizers from other countries will only favor Ostchem as a monopolist in the market.

 

In fact, the Ostchem Company is trying to solve the problem of the deterioration of its plants at the expense of farmers. Because of this, the costs of gas for the production of fertilizers at the enterprises of the company significantly exceed the costs of foreign competitors - 1.1 thousand cubic meters against 0.98 thousand cubic meters for the production of tons of ammonia. This situation is due to the fact that Dmitry Firtash, becoming the owner of the fertilizer production plants, which were built during the Soviet Union, almost did not invest in their modernization, and vice versa - withdraw money from them. As a result, countries such as Turkey and Bulgaria, which do not have their own gas, are successfully competing in the Ukrainian market with Ostchem products. At the same time, fertilizers from these countries must be imported, and Turkey pays a duty from 5% to 6.5%.

The chairman of the union of producers, importers and traders of agrochemicals and agro-technologies Sergiy Ruban noted that today up to 80% of fertilizers are purchased by Ukrainian agrarians through trading companies that supply them from other countries and create a balance of products in the domestic market. However, the introduction of preliminary measures in the framework of the investigation will mean one thing for the farmers - they will not get the fertilizers quantitatively and will definitely get a higher price for them.

“This is an artificial narrowing of the competitive field. It is no longer about the economy but ordinary greed,” said Sergiy Ruban.

In the light of all of these consequences, the Commission's motivation to make such a decision is unclear. Moreover, the current government (members of the commission are members of the Cabinet of Ministers), to whom the Ukrainian society gave a clear assessment during the elections, simply does not have the political right to make such fitting decisions for Ukraine.

Therefore, Ukrainian Agri Council appeals to the President of Ukraine Volodymyr Zelensky with a request to intervene in the situation and protect the Ukrainian agrarians by involving law enforcement authorities in investigating the circumstances of the Commission’s decision.

Wednesday, 28 August 2019

 

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