eurochem-annual-report-2011

Business review
Management report
Logistics and international sales
Group sales by region
% of Group sales
5
4
6
7
8
1
2011
3
Change to 2010
% (percentage points)
1 Russia 24% –
2 Asia 23% 4
3 Latin America 15% –
4 Europe 14% (5)
5 CIS 12% (1)
6 North America 8% –
7 Africa 3% 1
8 Australasia 1% –
76%
of sales outside Russia
50 EuroChem Annual Report and Accounts 2011
2
Logistics
While our logistics function is not a reportable business segment, it is a vital component of our vertically
integrated business model. Capturing transportation margins allows us to reduce overall transportation
costs and protect our market competitiveness.
EuroChem’s logistics infrastructure includes port facilities and transhipment terminals, rail stock, and
brokerage services. In late 2011 and early 2012, we acquired two Panamax vessels to complement the
fleet of ships we rent on long-term leases.
Our Tuapse Transhipment Terminal began operating in July 2011. Located on the Black Sea coast, this
terminal – our latest – is an important component of the future cost-competitiveness of our potash
shipments from Gremyachinskoe, and is capable of handling 2.3 MMT of fertilizers per year. To support
potash exports from our Verkhnekamskoe potash project we plan to construct a fertilizer transhipment
facility of even bigger size in Ust Luga.
Shipments of iron ore from Kovdorskiy GOK to Asian markets are despatched from our 1.5 MMT capacity
Murmansk Bulk Terminal. In July 2011, for the first time ever, EuroChem cargo ships, under nuclearpowered
ice-breaker escort, took the Northern Sea Route to deliver iron ore concentrate from Kovdor to
China. Following the Russian Arctic coast, rather than using the traditional routes via either the Suez Canal
or the Cape of Good Hope, significantly reduced both delivery time and transportation costs.
We also operate a terminal in Sillamae (Estonia) which has the capability to handle 800 KT of methanol
and 200 KT of other chemical products per year. Additionally, EuroChem uses the Klaipeda (Lithuania)
port facilities which can cater for 3.5 MMT of bulk fertilizers, 1 MMT of phosphate rock, and up to
0.5 MMT of liquid chemicals.
To keep transportation costs down and minimize bottlenecks, we also own and operate a c. 7,000-strong
rail stock and 45 locomotives.
International sales
Our international sales network currently includes the Swiss-based EuroChem Trading GmbH, which
is responsible for global sales outside the CIS and North America; EuroChem Trading USA Corp.,
a Florida-based trading company responsible for North American sales; and EuroChem Comercio de
Produtos Quimicos Ltda, which is based in São Paulo and supports our sales efforts in this rapidly
expanding market. Revenues from these three companies are attributed to the Nitrogen and
Phosphate segments.
Reconciliation of segment and external sales volumes (KMT)
2011 Nitrogen Phosphates Distribution Other
Intra-group
sales
External
sales
Nitrogen fertilizers
Ammonia 242 – – – (210) 32
Urea 1,920 – 107 83 (120) 1,990
AN 1,732 – 499 0 (511) 1,724
UAN 719 – 78 101 ( 83) 815
CAN 191 – 52 – ( 61) 181
Organic synthesis products 442 – – – – 442
Phosphate fertilizers
MAP, DAP – 1,866 122 – (140) 1,849
NP – 115 45 – (48) 112
Feed phosphates group – 240 12 – – 251
Complex fertilizers group (NPK) 401 0 239 2 (59) 583
Apatite concentrate – 166 – – (2) 164
Iron ore concentrate – 5,468 – – – 5,468
Baddeleyite concentrate – 12 – – – 12
5,647 7,868 1,154 186 (1,235) 13,623