Ukraine Crisis Hits Chemicals

Military action between pro-Russian forces and Ukraine, which began in February, has forced the closure of major fertilizer plants and may now be slowing chemical trade in parts of Europe, experts say.

Until the conflict emerged, Ukraine was one of the world’s largest producers and exporters of fertilizers. But two fertilizer complexes run by Ostchem in eastern Ukraine have been forced to close in recent months and show no signs of reopening. The plants produced about one-third of the country’s ammonia and urea.

The market for those fertilizers is now tightening across the U.S. and Europe as a result of reduced supply from Ukraine and rising demand as the fall planting season gets under way, according to Evgenia Apostolopoulou, senior consultant for IHS Chemical.

At the same time, perceived geopolitical risks, including those associated with the conflict in Ukraine, have led to a cutback in chemical orders from German companies, says VCI, Germany’s main chemical industry association. VCI blames the rise of geopolitical risks across Europe for a 2.3% decline in German chemical production in the second quarter of this year compared with the first quarter.

Chemical firms are watching for impacts from trade sanctions imposed by the European Union and U.S. on Russia. Germany’s BASF, which is the world’s largest chemical maker and which had sales to Russia last year of $1.8 billion, says it felt no impact from the conflict up until the end of July. “However, at the moment, we cannot say how the sanctions will ultimately affect the business climate, which could have a mid- to long-term impact on our activities,” the company tells C&EN.

Germany has particularly close trading ties to Russia. In contrast, Europe’s leading chemical association, CEFIC, so far sees no evidence that the crisis in Ukraine is affecting overall European trade in chemicals as a result of either sanctions or fighting in areas close to plants, says CEFIC economist Moncef Hadhri.