The EU will suspend the existing 5.5% and 6.5% tariffs on ammonia and urea used as feedstock for nitrogen fertilizers. According to the amendment, the European Council's amendment to the Decree is valid until June 17 next year. The rationale for the amendments to the regulation according to the European Commission's proposal states that the EU market for certain nitrogen fertilizer raw materials is highly dependent on imports from third countries. According to statistics, in 2021 the EU imports 2.9 million tons of ammonia and 4.7 million tons of urea to produce nitrogen fertilizers. The prices of these products have risen sharply since last year and have increased even more this year. Although a large portion of EU imports are duty-free, the EU also imports large amounts of nitrogen fertilizer from countries with tariff rates of 5.5% to 6.5% on nitrogen fertilizer raw materials.
The reasons also point out that even before the Russia-Ukraine conflict, prices in the raw materials market had already started to rise significantly, which was reflected in higher energy and fertilizer costs in the agricultural market and therefore higher prices for agricultural products. The Russian-Ukrainian conflict and the sharp rise in global raw material prices have further increased prices in the agricultural market, which, as stated in the justification for the Council Regulation, exposes the vulnerability of the EU food system, which is heavily dependent on imported fertilizers.
From the point of view of the purchasing power of consumers and the income of agricultural producers in the EU, the significant increase in producer costs and the consequent rise in food prices are a cause for concern. According to the Commission, reducing the cost of fertilizers and ensuring their availability may be a short-term remedy for this, as well as a subsequent transition to the use of sustainable types of fertilizers or fertilization methods. In the meantime, the EU fertilizer industry must have access to the necessary imports, including the raw materials needed to produce fertilizers within the EU.
The supply of nitrogen fertilizers on the international market has shrunk, and the EU's import tariffs on intermediate fertilizer raw materials, including ammonia and urea, are themselves a barrier to exporters entering the EU market, as many countries around the world do not have similar tariffs. However, the temporary suspension of tariffs does not apply to Russia and Belarus.
András Sándorfy, managing director of Hungarian production and distribution seed company Marton Genetics, said that Kazakhstan and Uzbekistan could also become important suppliers, with both fertilizer raw materials available from the above two countries.
The managing director said the expected drop in fertilizer prices could be accompanied by a drop in grain prices, but the latter could be more than justified by the drop in input prices.
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