Production of AdBlue, a special additive for diesel engines used to reduce NO (nitrogen oxide) emissions, was launched by Ostchem on the basis of Cherkassy Azot
“Today, Cherkassy Azot is capable of producing volume that provides 80% of the Ukrainian market and, if necessary, can ramp up production to cover all domestic consumption and for export to EU markets,” the company said in a press release on Friday.
It is specified that the market volume in Ukraine in 2022 was 23.4 thousand tons, and it decreased by more than 10 thousand tons due to military actions. Growth potential of Ukrainian market after introduction of standard Euro-4, Euro-5, Euro-6 exceeds 250 thousand tons, as the company believes.
Project on AdBlue production at Cherkassy “Azot” was announced in February 2022, in May 2022 the plant began to produce the first batches of product, and today the volume of urea solution production accounts for 30% of Ukrainian market needs.
“We are capable of becoming a major national player and gradually displacing imports. Our plans are to become a strong player in the EU markets, where demand for AdBlue is at a high level,” said Sergey Pavlyuchuk, head of Ostchem’s nitrogen business.
According to the release, the new production facility passed an international audit and this week received all required certificates confirming the quality of the product and allowing to use the AdBlue trademark and enter the EU markets, where, according to Ostchem, Ukrainian AdBlue has good prospects.
It is stated that at the first stage the company intends to fill the Ukrainian market by planning wholesale sales of AdBlue directly from the facility, as well as sales through retail chains, service stations and petrol stations and is already negotiating with a number of petrol stations to install their own AdBlue stations.
According to Ostchem, a large consumer of AdBlue will also be the agro-industrial complex, which uses modern machinery of the new generation.
A separate direction will be sales of the product in small containers of 10 and 20 liters.
The second stage will involve export to the neighbouring EU countries – Lithuania, Latvia, Romania, Hungary and Poland, as well as major AdBlue consumers – Germany (consumption level of 2.4 m t/year), France (2.1 m t/year), Italy (1.3 m t/year) and Turkey (726,000 t/year). According to Group DF estimates, the European market volume exceeds 7.2 million tons per year.
It is also stated that Cherkasy Azot will be the only Ukrainian producer of AdBlue by “direct method”, i.e. method of urea melt production, while the other producers use so called “blending” method, i.e. technology of mixing granulated urea with water. According to the company, its method ensures very high and stable quality at a low price, and in order to distinguish its AdBlue reagent on the Ukrainian and European markets, Ostchem has already registered its own trademark “Ukrblue”.
The use of the reagent is stipulated by EURO 6 standards and is aimed to reduce emissions of harmful substances. VDA (Verband der Automobilindustrie e.V., German Automotive Industry Association) owns the rights to the AdBlue trademark.
Group DF consolidates assets in the gas distribution, chemical, titanium and port industries, as well as in agriculture and media. The founder and owner of Group DF is Ukrainian businessman Dmitry Firtash.
Ostchem is the nitrogen holding of Group DF. It includes Rivneazot, Cherkasy Azot, as well as Severodonetsk Azot and Stirol (not operating and located in the occupied territories).
Cherkasy Azot PJSC has been a part of Group DF since 2011. The design production capacity of PJSC “Azot” is 962.7 thousand tons of ammonia per year, ammonium nitrate – 970 thousand tons per year, urea – 891.6 thousand tons, UAN – 1 million tons per year.
Ostchem’s nitrogen holding plants produced 515.5 thousand tons of mineral fertilizers in the first quarter of 2023, up 36.2% year-on-year, Group DF said in a statement on Friday.
According to it, Cherkasy Azot produced 387.4 thousand tons and Rivneazot produced 128 thousand tons, while Azot produced 137.8 thousand tons in March, the maximum since the beginning of the full-scale war.
“Lower gas prices have reduced the selling prices of mineral fertilizers. As fertilizers became more affordable, we started selling more and showed very good results. This spring, the high utilization of enterprises lasts longer than usual,” a comment by Oleg Arestarhov, head of Group DF’s corporate communications department, is quoted in the report.
It is pointed out that the key products produced by Ostchem plants were urea, UAN (Urea Ammonium Nitrate Network), ammonium nitrate, and lime ammonium nitrate (LAN). Urea output in the first quarter increased 4.7 times, to 106,500 tonnes, and UAN output 2.1 times, to 108,500 tonnes.
Production of ammonium nitrate increased from 217.1 thousand tons to 255.4 thousand tons, while UAN production fell from 62.3 thousand tons to 10.6 thousand tons.
“The structure of production corresponds to the structure of demand. The further demand will determine the production load of the plants, the terms of the repair campaign,” Arestarhov pointed out.
Among the new market trends the company highlighted the active supply of fertilizers in the de-occupied territories (Kherson, Nikolaev, Chernigov and Sumy regions). And among the factors constraining the growth of the fertilizer market, it noted an increase of marketing and logistics risks of agribusiness, such as the uncertainty of the prospects for a grain agreement, and restrictions on imports of Ukrainian grain, introduced in April 2023 by some EU countries.
As reported in early February, Group DF’s nitrogen holding Ostchem reported on the planned increase of its capacity utilization for the production of mineral fertilizers at Cherkasy Azot from 30% to 70%, and Rivneazot – up to 50% due to the seasonal increase in demand
Group DF earlier estimated the volume of consumption of ammonium nitrate by the Ukrainian market in 2022 at 1 million tons (import – 330 thousand tons); urea – 410 thousand tons (import – 225 thousand tons); UAN – 580 thousand tons (import – 190 thousand tons), stating that the expected increase in fertilizer consumption in 2023 by 15-20%.
The decision of the Supreme Court to refuse the Ostchem Holding Limited company of Dmytro Firtash to comply with the decision of the Arbitration Institute of the Stockholm Chamber of Commerce to recover over $300 million from Odesa-Port Side Plant for gas supplies causes mixed feelings and bears risks of consequences, Minister of Justice Denis Maliuska has said.
“The decision was also a surprise for me… On the one hand, as a citizen, I am glad that the funds will not be recovered from the state-owned enterprise, and on the other hand, the argumentation and how it looks in terms of possible consequences, perhaps this is not yet the end of the story, risks remain,” he said in an interview with Interfax-Ukraine.
Commenting on commercial arbitrations against Ukraine in general, Maliuska said that he does not see the danger of making any critical decisions regarding Ukraine this year.
As reported, in 2016, the Arbitration Institute of the Stockholm Chamber of Commerce decided to recover $250 million from Odesa-Port Side Plant in favor of Ostchem Holding Limited for the gas that the company supplied to the plant in 2013.
In March 2017, by a decision of the Yuzhny City Court, this decision was legalized on the territory of Ukraine. The validity of this decision was also recognized by the Court of Appeal of Odesa region. In July 2018, the Supreme Court reversed those decisions.
Again, Ostchem was able to achieve a positive decision for itself in the Kyiv Court of Appeal in April 2019. According to a document published in the unified register of court decisions, Odesa-Port Side Plant, in accordance with the decision of the Stockholm tribunal, had to pay Ostchem almost $193.3 million in principal and $58 million in fines.
The plant objected to the ruling made by the Ukrainian court, noting that the company had been stopped since the middle of 2018 and the implementation of the decision of the Arbitration Institute of the Stockholm Chamber of Commerce would lead to bankruptcy and threats of a man-made and environmental disaster. In addition, the State Property Fund said that the contracts signed by plant and Ostchem are void. Odesa-Port Side Plant and the State Property Fund filed an appeal with the Supreme Court, which satisfied it in June 2021 and finally refused Ostchem to comply with the decision of the Arbitration Institute of the Stockholm Chamber of Commerce to recover over $300 million from the plant.
Ostchem has not yet announced what action it has taken or will take following the Supreme Court’s verdict.
