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Record low gas prices in the world, restrictive tariffs in the largest markets and regulated the cost of raw materials in the country has deprived the Russian manufacturers of ammonia advantages in global markets and made unprofitable the construction of most new plants in the nitrogen sector, including fertilizers. In the current situation, experts say Vygon Consulting, the chances are only projects on existing sites. According to them, can solve the problem of deregulation of domestic gas prices to at least a particular export industries.The fall in gas prices on world markets against the background of maintaining the regulated domestic prices at the same level has reduced the competitiveness of Russian producers of ammonia and its derivatives (in the Russian Federation accounted for 16% of global trade in ammonia). Such data are contained in the overview Vygon Consulting.The company’s experts say that because of the decline in global gas prices in 2019, the amount of price subsidies to Russian producers of fertilizers, the structure of transaction costs of which raw materials is 70-90%, reduced by five times relative to 2018, to about 33 billion rubles. So, if in 2018, the price subsidy was 9.3 thousand RUB per ton of ammonia, by the end of 2019 she fell to 1.7 thousand rubles per ton. In the first quarter of 2020, according to the calculations Vygon Consulting, it was negative (-0.5 thousand RUB for a ton). Data for later period are not given, but in the second quarter, the price of gas in North-West Europe declined further and now stands at about $65 per 1 thousand cubic meters — the same gas is in the Smolensk region.According to Vygon Consulting, to improve the situation in the industry would deregulate the domestic gas prices although only for export industries. Experts note that the use of formula pricing could reduce the risks associated with price volatility on the final product, and increase the attractiveness of projects for foreign investors.The competitiveness of Russian nitrogen fertilizers reduce also introduced a number of importers duties. So, in October of 2019, the European Commission imposed duties on the import of carbamide-ammoniac mix from Russia, USA and Trinidad and Tobago for a period of five years (€per tonne of 27.77 for EuroChem, €42,47 per ton for other suppliers). In Ukraine in 2014, there are duties on ammonium nitrate in the amount of 29-43%, depending on the manufacturer. Also measures against imports of certain types of fertilizers from Russia are in India, which is stepping up domestic production.The dynamics of demand in major consumer markets (80% of the ammonia consumption accounts for the agricultural sector) in recent years is deteriorating. According to the calculations Vygon Consulting, in the medium term, the consumption of ammonia to the needs of the agricultural sector will grow moderate rates — on averageeat at 1% a year.Notwithstanding fees and the increased competition due to low gas prices, fertilizer manufacturing in Russia, the existing capacity remains cost-effective, although the margin has decreased significantly. As for new projects, they are associated with significant risks.At the moment the only cost-effective projects for the production of urea already existing production of ammonia, the report said. But because of significant growth of prices on urea is not expected given the export potential of China, even for existing projects there is an additional risk of a narrowing spread ammonia—urea.In Russia, claimed at least nine major new nitrogen projects with a total capacity of 6 million tons of ammonia and 10 million tons of urea. Subject to their implementation capacity for the production of ammonia will increase by more than a third, to 27 million tons, urea — half, to 23 million tons. But, as noted in Vygon Consulting, of these projects, only three will be implemented on existing sites (EuroChem, Togliattiazot and “KuibyshevAzot”).Igor Tyablikov of Rupec agree that the economy is the construction of nitrogen plants really dependent on gas prices and deregulation of prices would increase the investment attractiveness of projects. Also, he says, a possible mechanism of export support through subsidized transportation, which would reduce the logistics lag caused by the location of a number of industries not far from the port.Olga Matushenko