Eastern European country is one of the main global suppliers of the nutrient; Brazil is a major importer
Potash production in Belarus: state-owned Belaruskali exports around 13 million tons of the product per year — Photo: Disclosure
The year reaches only its second month and the American and European economic sanctions on Belarus, established in 2021 and that promise to halt trade with one of the largest potash suppliers in the world, are already making themselves known. Between January and this beginning of February, two companies announced interruptions in business with the former Soviet republic: one for fertilizers and another for logistical services.
While the market awaited the next chapter of the imbroglio, potash prices fell to US$ 15 per ton in January. At the end of last December, the ton was worth US$ 810 (put at the port in Brazil). But, analysts and importers estimate that the value could rise by 20% in the coming months. For farmers who depend almost entirely on imported nutrient, like Brazilians, the scenario is worrying.
On January 10th, the Norwegian Yara International, the largest fertilizer company in the world and leader in the segment in Brazil, announced that it would stop purchasing potash from Belaruskali, a Belarusian state-owned company that supplies, per year, around 13 million tons of product. The volume is about 20% of the global consumption of potassium, one of the most used ingredients in crops around the world, along with nitrogen and phosphate derivatives – the NPK trio.
In a statement, Yara said that although supply is currently in full compliance with applicable sanctions, other links in the supply chain are “withdrawing essential services necessary to allow exports” from Belarus to take place. “As a result, Yara began to reduce purchasing activities,” which should occur by April 1, the document states. It is worth mentioning that Yara (the global operation, not just the Brazilian one) is the largest individual buyer of the Belarusian product – the company accounts for 17% of the total.
The second movement that affects the flow of trade came into effect this month. The state-owned Lithuanian Railways will stop transporting potash by rail that leaves Belarus and travels to the port of Klaipeda, in Lithuania, a country that is part of the European Union. This is the only route for the Belarusian product to reach the rest of the world.
According to the director of fertilizers at consultancy StoneX, Marcelo Mello, the main alternatives for Belarus to export are in Russia (via Saint Petersburg) and Ukraine. The first would make the process more costly and less efficient, and the second may not even be a viable option, given that the country is the epicenter of military tension with the Russians.
This week, it came to light that Belarus is in contact with Moscow to try to ship its products through more than one Russian port. Furthermore, India is proposing a deal to Belarus. “The suggestion is to pay for the potash in local currency (rupee)”, adds Mello.
Complex plan
In this way, he explains, importers would avoid one of the problems generated by the crisis, which is closing operations in dollars. “But it’s a complex plan B”, he says. India is the third largest importer of fertilizers in the world, behind the USA and Brazil. One way out for Belarus would be China. The Asian country could replace purchases from suppliers in other countries, which would bring some rearrangement to the “short blanket” of supply to the world. “But it wouldn’t be easy to implement either, because China also has relationships to maintain.”
The escalation of conflicts between Western powers and the government of Aleksandr Lukashenko, president of Belarus, gained momentum throughout 2021. Accused by Western countries of rigging elections in his country, Lukashenko even hijacked a civilian plane in May to persecute a political opponent.
After the episode, in the middle of last year, the circulation of Belarusian products in European Community ports became more restricted. That was when the EU imposed the first embargoes on the country. Then, in August, the US established a series of sanctions and, among them, banned trade with Belaruskali. The embargo was published in August and came into effect in December.
Commerce will be completely banned from April, when the commercial arm of the state-owned company, BPC, will be included in the embargoes. The ban only involves Americans, but the effects affect other importing countries, such as Brazil. This is because import operations are usually carried out in dollars and intermediated by banks that have offices on American soil. Importers in Brazil have been studying how to overcome this problem since last year, industry sources have already informed Valor.
By Érica Polo — From São Paulo
03/02/2022
Source: Valor Econômico