1. Head of FAS signs document postponing apatite concentrate market liberalization

    27 March, 2014

    Head of the Federal Antimonopoly Service Igor Artemiev has signed a document extending the transition period on the apatite concentrate market until the end of 2016, a step that postpones the liberalization of the market for at least a year.

    A set of recommendations issued by the FAS in 2012 contains a special formula used to calculate concentrate prices during the transition period (with two options provided: 70 % of apatite price in Morocco + 30 % of the average price offered by the producer to domestic customers over the previous year; or 35 % of the minimum export price + 35 % of the Morocco price + 30 % of the domestic market price). The transition period was initially set to last until the end of 2013, and starting in the year of 2014, according to the FAS’s previous proposal, the price was to be “based on the minimum export prices of apatite concentrate, or prices determined by the global competitive market”, which in fact meant complete liberalization.

    Under the FAS’s formula, a tonne of apatite should currently be priced at about RUB 5 thousand. To compare: in Q3 2013 Phosagro (a domestic apatite producer with a virtual monopoly in the field) exported apatite at an average price of over 7 thousand rubles per tonne, including transportation costs (translating into a factory-gate price of roughly 6 thousand rubles per tonne).

    What bears reminding here is that Uralchem (one of the largest consumers of apatite in Russia) has issued numerous statements saying that its Voskresensk Mineral Fertilizers (VMF) plant turns unprofitable even when prices are determined using the FAS’s formula. The plant’s phosphate fertilizer facilities have stood idle since early February. The holding company said that “the formula essentially makes the Russian mineral fertilizer industry and agriculture dependent upon decisions of other (Moroccan) nation’s head of state, which will negatively affect our country’s food security”. Uralchem believes that the adoption of the formulas will make the Russian phosphorus-containing fertilizers market more monopolistic, forcing all independent producers to halt production. As for Phosagro itself, it has traditionally supported the FAS formulas, viewing them as a set of “fair and transparent rules for the players on the domestic apatite concentrate market” (quoting the company’s earlier statement characterizing the antimonopoly watchdog’s recommendations).

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