EuroChem lost the case. From now on there will be no Russian nitrate fertilizer in Ukraine

Photo: Reuters

The ruling of the Kyiv Court of Appeals of December 3 was published in the Unified State Register of Judgments of Ukraine yesterday. It dismissed the appeal of the Russian supplier of nitrate fertilizers EuroChem on the ruling of the District Administrative Court of September 23, 2014. Therefore, the duty on the company’s products supplied to Ukraine that was tripled on July 1 remains in force.

Worse than the others

EuroChem can challenge this verdict within 20 days in the Supreme Administrative Court, but the loss in the Kyiv Court of Appeals, according to experts, means that the company has little chances of retaining its market share in Ukraine, which in 2009–2010 reached 20–25%. The company supplied approximately 250,000 t of nitrate fertilizers to Ukraine during the off-season. The supplies were declining gradually, but the Ministry of Economic Development and Trade, making the decision on imposition of duties this year, incriminated the company not for its market share, but for dumping similar products that allegedly harmed Ukrainian producers: namely, Azot in Cherkasy, Rivneazot, Stirol in Horlivka and the Severodonetsk Azot Association (all controlled by Dmytro Firtash’ Ostchem).

As a result, a protective duty of 36.03% was imposed on EuroChem’s imports. The ministry spared other suppliers. For example, for the products of the Russian company Dorogobuzh the duty was 20.51%. The ministry explains such a difference saying that the products have a different margin from suppliers. For example, according to the Interdepartmental Commission on International Trade (ICIT), which conducted the anti-dumping investigation, for Dorogobuzh it was 40.5% and for EuroChem – 82.2%.

Unconvincing argument

It follows from the judgment that EuroChem requested the District Administrative Court to uphold the ICIT decision of October 25, 2010. With its help the commission set an import duty on nitrate fertilizer at a rate of 0% for EuroChem, which was effective until 2014. The commission was forced to make such a decision by the court's ruling, which supported Eurochem in similar proceedings five years ago.

Another interesting fact is that the Russian company tried to secure itself in the event of further similar proceedings with respect to its products. “The plaintiff asked the court to order the ministry and the commission to refrain from further actions regarding inclusion of EuroChem in subsequent revisions of anti-dumping measures in relation to imports of ammonium nitrate manufactured in Russia,” the judgment reads.

In response to the demands of EuroChem, a panel of judges of the Kyiv Court of Appeals recognized the right of the Ministry of Economic Development to conduct anti-dumping investigations and pass down any judgments that do not contradict the legislation on foreign trade. It also recognized the ministry’s right to revise its previous decisions and considered that the desire of the plaintiff, which was trying to pass these functions to the court, discredited the executive bodies. As to EuroChem’s desire to secure itself against anti-dumping proceedings in future the Court of Appeals decided that it was, in fact, the court’s interference with the powers of the defendants.

Firtash’ people are happy

Ostchem, whose plants will benefit from the court’s ruling, ignored Capital’s inquiry. But representatives of Firtash’ other company – Group DF – had something to say. Its lawyer Ihor Holchenko, who organized the investigation against Russian nitrate fertilizer in Ukraine, is satisfied with the victory in court. “The ruling of the Kyiv Court of Appeals confirmed the position of Ukraine’s nitrogen chemical enterprises. We believe the ruling is fair and objective,” said Holchenko.

Unprofitable trade

The court’s ruling against EuroChem on the eve of the spring sowing season is very beneficial for Firtash’ nitrogen plants, because the duty, per se, makes the cost of Russian nitrate fertilizer uncompetitive in Ukraine, particularly on the backdrop of continued depreciation of the hryvnia.

Representatives of Agrocenter EuroChem Ukraine – a subsidiary of the Russian manufacturer – calculated that at the rate of UAH 20/USD and the current import duty the nitrate will bankrupt Ukrainian farmers. “Deliveries on these conditions are simply inappropriate. Farms will have to pay UAH 8,000 for a ton of nitrate fertilizer manufactured by EuroChem, UAH 9,000 for carbamide,” Director of Agrocenter EuroChem Ukraine Yevhen Filonov calculated. For this reason, in January, in the midst of pre-sowing the procurement of the company’s products will not likely to be delivered to Ukraine.

Growing shortage

At the same time, industry analysts have already estimated the amounts of nitrate and nitrogen fertilizers that farmers will be short of this spring due to the downtime at Firtash’ plants in the eastern part of the country. “The shortage of nitrate fertilizer will be close to 450,000 t and the shortage of carbamide, which could be used to compensate for nitrate, will be close to 100,000 t,” said Head of Infoindustriya IC Dmytro Hordiychuk.

Another nitrogen fertilizer - carbamide-ammonium nitrate – will also not cover losses, as Ostchem plants can offer no more than 25,000 t of fertilizer per month (and during the season expand to 45,000 t). Earlier, the press service of Group DF reported that Ukraine’s agricultural market consumed approximately 1.6–1.8 mn t of nitrogen fertilizer per year, most of which – 1–1.2 mn t – is used during the spring sowing season.