PhosAgro requests Russian gov't adjust export duty parameters to account for production margins of various fertilizer types - source

MOSCOW. Jan 19 (Interfax) - PhosAgro has requested that the Russian authorities adjust the parameters of the export duty implemented on January 1, by reducing the cut-off price for marked-down nitrogen and potash fertilizers; and PhosAgro CEO Mikhail Rybnikov sent the corresponding letter to President Vladimir Putin at the end of December, a source familiar with the content of the letter told Interfax.

According to the company, the current approach discriminates against "more technologically advanced, though less marginal", producers of phosphates and complex fertilizers.

Under the existing parameters, nitrogen and potash fertilizers - which account for more than 60% of industry exports - are not subject to duties, as their prices at the beginning of the year had fallen below the cut-off price of $450 per tonne for all types of fertilizers. Because of "the approval of knowingly incorrect parameters for calculating potash and nitrogen fertilizers," it will not be possible to collect the planned amount of duties in 2023, PhosAgro believes.

The volume of revenues to the budget from duties in January is expected to be 20% of the planned volume, implying a total of 22 billion rubles for 2023 against the pledged 120 billion rubles, Interfax's source said regarding the contents of the letter.

PhosAgro believes that the duty parameters were approved without accounting for aspects such as the processing yield and the production profitability of various types of fertilizers.

"The duty levy will have minimal impact on the profitability of potash and nitrogen fertilizer production, which is 40%-60%, while the production profitability of phosphates and complex fertilizers will decrease to around 10%, which would lead to lower investment going forward," the source said when quoting the company's appeal.

Consequently, PhosAgro requests, "using the most transparent processes in order to determine the acceptable level of profitability in excess of operating costs as the baseline parameter for the withdrawal of excess profits."

Putin has instructed the Russian government to consider PhosAgro's appeal, according to the source.

The Economic Development Ministry told Interfax that it was "aware of the company's initiative."

"We are planning discussions with the concerned government agencies and businesses," the ministry's representative said.

PhosAgro has declined to comment.