EuroChem and Ust-Luga Company, coordinator of Ust-Luga port construction, have signed an agreement on construction of a bulk terminal for fertilizers transshipment yesterday.

MCC EuroChem announced the eventual construction of a fertilizers terminal in Ust-Luga port in 2006, and has reached an agreement with the port construction coordinator now. The terminal will cost 5 billion rubles, and in five years its capacity should reach 5 million tons of fertilizers a year. EuroChem has already completed the construction of the bulk terminal in Tuapse. Proprietary terminals shall enable the company to get rid of external operators, thus saving time and money ($20 per each ton of fertilizers).

EuroChem and Ust-Luga Company, coordinator of Ust-Luga port construction, signed an agreement on construction of a bulk terminal for fertilizers transshipment yesterday. According to Dmitry Strezhnev, the Head of EuroChem, the terminal will be used to export all kinds of fertilizers via the Baltic Sea. Three berths of 682 m total length and two storage facilities (305 340 tons of fertilizers) are to be built. The project development phase shall be completed within the end of the year. Project documents for obtaining the required Authority permits shall be developed and construction works shall be managed by a subsidiary to be registered in Leningrad Oblast. The company assesses the required investments at 5 billion rubles; the project should be completed in 3 4 years, and shall be financed by EuroChem on the account of company funds. The payback period may be of 6 10 years.

EuroChem intends to invest about 120 billion rubles in the construction of new production facilities and terminals within 2016-2017, according to Dmitry Strezhnev. Potassium fertilizer plants in Volgograd (4.6 mln TPY) and in Perm Oblast (2.5 3 mln TPY) shall be commissioned in particular. EuroChem shall export via Ust-Luga port 5 million ton of fertilizers a year, which will make 50% of company export sales in five years. The company plans to increase its yearly fertilizer production to 15 million TPY by 2015.

EuroChem is the largest Russian producer of mineral fertilizers. The company controls Nevinnomyssky Azot, Novomoskovsky Azot, Fosforit, EuroChem-BMU, Kovdorsky GOK (ore-mining and processing plant) and Lifosa.

According to Dmitry Strezhnev, EuroChem plans to modify its export sales scheme redirecting the export flows from Novorossiysk and three foreign ports (Tallinn, Ventspils, and Klaipeda) to the two proprietary terminals: Tuapse (the 2.3 mln TPY terminal is nearly completed) and Ust-Luga. The savings as assessed by the company Head should amount to USD 5 to 20 per one ton of fertilizers. The Ust-Luga terminal shall allow loading small ships capable of transporting fertilizers not only by the Baltic Sea, but also by major European rivers: the Danube and the Rhine.

Georgy Ivanin (Alfa-Bank) accepts that Ust-Luga port location makes it extremely suitable for fertilizer export, but adds that 'organizational issues, bureaucracy and tend high costs to impede construction projects in Russia. That was the reason why Acron, another major fertilizer producer, decided not to build anything in Ust-Luga and bought terminals in Estonia, the analyst explains. On the other hand, Anna Kupriyanova (Uralsib) retains that EuroChem made a right decision which will allow the company to complete its logistic chain in both North and South directions. The company will save both money and time, as external operators often cause delays. Furthermore, EuroChem shall have the possibility to use the terminal as fertilizer storage for spot operations, Anna Kupriyanova adds.

Source: Kommersant