Plants of nitrogen holding Ostchem, which unites enterprises of nitrogen business of Group DF, produced 959.7 thousand tons of mineral fertilizers in the first half of 2023, which is 60.9% more than in the same period last year, when 596.3 thousand tons were produced.
According to the press release of Group DF on Wednesday, Rivneazot produced 201.2 thousand tons, Cherkassy Azot 758.6 thousand tons, including in May it reached the maximum since the beginning of the war – 138.6 thousand tons.
It is specified that the structure of production in the first half of the year corresponded to the structure of demand for nitrogen fertilizers, taking into account the prices of competitors and the margins of individual products. The key products were: ammonium nitrate – 398.7 thousand tons (313.3 thousand tons in 6M 2022); urea-ammonia mixture (UAN) – 277.7 thousand tons (116.8 thousand tons); urea – 205.9 thousand tons (76.4 thousand tons). At the same time, production of limestone-ammonium nitrate (UAN) dropped almost fourfold to 17.2 thousand tons.
“Ostchem’s enterprises have adapted to work under war conditions. Under the conditions of war risks, logistical problems, blackouts and unscheduled shutdowns, the plants managed to pass peak load periods and ensure timely shipment of fertilizers to agrarians clearly in accordance with the concluded agreements,” the report quotes Ostchem’s nitrogen business head Sergiy Pavliuchuk as saying.
According to him, at the moment the main task is to prepare production facilities for the fall season, and after the completion of repairs key workshops will be launched, and the load of plants in August will increase.
It is noted that the main factors that contributed to a successful spring season and the implementation of the production plan are increased demand from farmers and large agricultural holdings and increased sales due to soft loans, acceptable gas prices and lower fertilizer selling prices, as well as the spring sowing season delayed due to weather conditions.
“Our companies are ready to produce as much fertilizer as the market can buy. Illegal imports of repackaged Russian fertilizers are holding back the development of the domestic chemical industry,” said Oleg Arestarhov, Head of Corporate Communications at Group DF.
According to him, Russian fertilizers are imported to the customs territory of Ukraine from five countries of the former Soviet Union. In particular, Arestarhov specified, since the beginning of this year, 382.8 thousand tons of urea were imported into Ukraine, including 269.5 thousand tons from Turkmenistan, Uzbekistan and Azerbaijan, while domestic production amounted to 205.9 thousand tons.
“With such a volume of imports, it will be much more difficult for urea producers such as Dniprazot and OPZ, which are now standing, to start up,” said the head of Group DF’s corporate communications department.
The release also notes that Ostchem will continue to increase production volumes in new sectors of chemistry. In particular, the company counts on AdBlue – a liquid reagent for diesel cars, the production volume of which amounted to 4.2 thousand tons in the first half of the year.
In addition, production of carbon dioxide in the first half of 2023 amounted to 10.1 thousand tons, while during this period Cherkassy Azot has been increasing its output on a monthly basis, and Ostchem has started to develop its logistics infrastructure to ensure stable supplies of industrial gases both in Ukraine and Europe.
Group DF consolidates Dmytro Firtash’s assets in the gas distribution, chemical, titanium and port industries, as well as in agriculture and media.
Ostchem is the nitrogen holding company of Group DF, which unites the largest mineral fertilizer producers in Ukraine. It includes Rivneazot, Cherkasy Azot, as well as Severodonetsk Azot and Stirol, which are out of operation and located in the occupied territories.
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.
