Are Russian ports waiting for Belarusian potassium?

After the Lithuanian government blocked the transit of Belarusian potash fertilizers, the issue of their further deliveries to the world market has become acute. So far, Russian ports seem to be the only option.

But are the Russians ready to offer the Belarusians their services in transporting Belaruskali products? The Belorusy i Rynok newspaper tried to figure it out.

On February 1, Lithuania stopped the transit of potash fertilizers from Belarus. The most important export route (we refer not only to the port of Klaipeda, but also to the port of Kaliningrad) is cut off. Since the total volume of exports of potash fertilizers is huge – more than 10 million tons, it is very difficult to quickly find other ports to replace the aforementioned ports.

 

Going round in circles instead of the Arctic Circle

The point of potash going beyond the Arctic Circle, to the port of Murmansk, was discussed last summer. But why not to Russian ports in the Baltic? The answer is simple: only in Murmansk there are free specialized terminals. In addition, although it is far from Murmansk, it is much closer to China along the Northern Sea Route (NSR) than from Ust-Luga – almost twice. It is 11,493 miles away from the Baltic port to Shanghai, and from Murmansk to Shanghai, if you go along the NSR – 6,472 miles. True, for ordinary ships passage along the NSR is possible only between July and November.

However, in autumn these conversations ended. Now they are again talking about the possible supply of Belarusian fertilizers through the ports of the Russian Federation, but these are already other ports. Can Belaruskali and Belarusian Potash Company use the existing capacities of Russian ports? We asked Russian experts this question.

 

Press conferences went smoothly

Vitaly CHERNOV, head of the analytics department at Information and Analytical Agency Port News, noted that currently Russia does not have sufficient capacities to receive Belarusian potassium in the required volumes. Russia itself has to export about 8 million tons of its fertilizers through the ports of Latvia and Estonia. Theoretically speaking, part of the potassium volumes can be received by the Ultramar terminal in Ust-Luga. However, firstly, it has not yet reached its full capacity; secondly, it is not designed to work with potassium; and thirdly, it has long-term contracts for loading with Russian shippers. Other specialized terminals in Ust-Luga are also under construction and are also focused on working with Russian fertilizers.

In the port of Primorsk, the Primorsky UPC project is being implemented which, however, is still at the initial stage of construction; its launch is scheduled for 2025. As for the ports of the Southern Basin, there are no free capacities for transshipment of Belarusian bulk cargoes. In Murmansk, bulk carrier capacities are loaded, and Arkhangelsk is loaded with project cargoes for Arctic projects.

According to the analyst, potassium can theoretically be loaded in big bags at universal terminals, but this is expensive. Therefore, the Belarusian authorities can hardly count on the fact that Russian ports will be able to accept any substantial volumes of fertilizers this year, and what is accepted will suffer from high logistics costs.

 

No other port can replace Klaipeda

PhD in Economics, Deputy Head of the Department of Economic and Financial Strategy of the Moscow School of Economics Murad ALIMURADOV emphasized that today the capacities of Russian ports that could receive Belarusian fertilizers are mostly loaded under long-term contracts, including with Uralkali, a direct competitor of Belaruskali.

“It is unlikely that any port in Russia will be able to take on the Belarusian cargo turnover of the Klaipeda port. The Belarusian authorities need to negotiate with various ports about whether they are ready to handle Belarusian cargo at all. It all depends on whether they have free capacities, because the ports are designed to service the Russian trade turnover. Whether they will be able to accept Belarusian cargo depends on the port infrastructure, storage capacity, their vacancy, the type of goods that the Belarusian side intends to transship, and many other factors,” said Murad Alimuradov.

According to him, it is necessary to take into account the fact that short-term cooperation is unprofitable for ports, they need long-term contracts. After all, the question is not only how Belarusian suppliers of fertilizers will compete in these ports with Russian ones. The point is also that the construction of a terminal for ocean-going ships is very expensive, and port owners need to be sure that these investments will pay off, that the flow of cargo will last not for one, two or five years, but for decades, and that expensive infrastructure will be involved.

“Why are Russian international ports now developing? Because the state strategy of transport development has been adopted. In order for Belarusian fertilizers (and not only) to go through Russian ports, it is necessary that Belaruskali coordinate its long-term strategy with Russian counterparties. Not the way when today in connection with sanctions it transports its goods through this port, and six months later it will choose another one.”

 

When a million is just one tenth

So, what is the volume of Belarusian potassium that Russian ports will be able to accept year? “It’s hard to say, because no terminal has yet confirmed its readiness to accept them. According to my estimates, it can be no more than 1 million tons per year. I don’t want to refer to specific terminals because I can’t speak for them,” Vitaly Chernov told the correspondent of the Belorusy I Rynok newspaper.

Summing up, it should be noted that the existing terminals for transshipment of fertilizers in the ports of St. Petersburg and Ust-Luga are used by the main competitor of Belaruskali – Uralkali owned by Dmitry Mazepin.

In addition, we can definitely say that the scrapping of long-term supply chains is already both to the detriment of the Soligorsk enterprise and to the detriment of the whole budget. Not only because the distance will increase many times over both by land and by sea. It is necessary to invest in additional port production facilities, in the purchase or lease of hundreds of additional wagons (at least one and a half times more is needed, since the turnover for Klaipeda is 4-5 days, for Ust-Luga – 7-9 days, and for Murmansk – 14-18 days), and the Russian Railways cannot reduce the tariff for the transportation of Belarusian potassium to zero.