Strategic problems and possibilities of development of the Russian mining and chemical companies

For definition of the main problems and opportunities of development of the mining and chemical companies of Russia we will carry out by SWOT - the analysis (table 1.9) and the analysis of influence of the main competitive forces to branches (table 1.10).

Table 1.9

SWOT - the analysis of the mining and chemical companies of Russia



Analysis of the external environment

  • • attractive fundamental characteristics of branch (increase in demand for fertilizers, high prices of agricultural products, etc.)
  • • a possibility of receiving natural gas at the internal Russian prices
  • • a possibility of service of additional groups of consumers in connection with incomplete utilization of capacity
  • • strategic importance of the made production
  • • existence of a possibility of expansion of sales markets
  • • potential of perspective growth of the Russian market of fertilizers
  • • • effective work of mining productions as basic assets of the company
  • • existence of access to all types of raw materials - to potassium, phosphorus and nitrogen for production of all types of mineral fertilizers
  • • high extent of processing and complex use of phosphatic raw materials
  • • risk of reduction of prices in the world market and losses of the planned profit level by the companies
  • • risk of decrease in the internal prices in connection with state regulation
  • • negative change of course of trade policy in the main consuming countries
  • • a possibility of appearance of new competitors, competitive at the price
  • • volatile nature of the markets of mineral fertilizers
  • • introduction by the Russian authorities of export duties and quotas for the exported production
  • • the production risks connected with work of mining production (failure to follow the plan, unproductive breaks, production injuries, etc.)
  • • the change in price for raw materials (natural gas, sulfur, potassium) and purchase conditions at suppliers, growth of tariffs for the electric power, railway transportations, a freight

Analysis of the internal environment



  • • considerable share of export
  • • large reserves of quality mineral
  • • use of the modem high-performance equipment and technology
  • • low level of production expenses
  • • world's leading producers of high-grade potash and phosphatic raw materials
  • • prevalence in branch of the vertically integrated flexible business models
  • • presence at some companies of own research institutes and design and research centers
  • • shares of some companies are traded on MICEX-RTS and the main platform London фондовой биржи
  • • incomplete utilization of capacity and need of their maintenance with a reserve in view of seasonality of consuming of fertilizers
  • • the growing expenditures on improving of consumer properties of production because of the competition in the world market
  • • dependence on raw materials supply (natural gas, sulfur, components for complex fertilizers)
  • • lack of own ports and terminals
  • • territorial remoteness of sources of raw materials from refinery capacities
  • • the considerable capital intensity and need of large small caps attachments in development of investment projects
  • • a limited possibility of use of instruments of marketing because of standardization of production

In the markets we will define appeal of branch and a condition of the competition by M. Porter's model including the analysis of five main competitive forces [70,71]: threat of emergence of products substitutes; threat of appearance of new competitors; market power of suppliers; market power of consumers; level of competitive fight.

The market of potash fertilizers differs from phosphatic a little and nitric therefore the competitive analysis is submitted separately for two segments. It is much less producers of potash fertilizers in the world in view of an arrangement of fields, and in Russia currently in general the temporary monopoly (table 1.10) works.

Table 1.10

Analysis of impact of competitive forces on the Russian mining and chemical companies



Influence on a potash segment

Influence on a nitric and phosphoric segment




Market power of suppliers

The high level of the power as sales markets are completely distributed, and conditions and delivery price of a product is defined by producers.

The high level of the power for the producers which don't have own source of raw materials as most the companies vertically - are integrated and independently process raw materials, limiting a share of third-party deliveries.

Threat of appearance of new competitors

Low level of threat because of a considerable capital intensity of projects and limitation of resources.

The high level of threat caused by significant increase in market capacity

Market power of consumers

Low level of the power because of indispensability and strategic importance of a product and limited number of producers

The high level of the power of the companies consumers connected with high extent of standardization of production

Threat of emergence of products substitutes

Currently the threat of emergence of products substitutes is absent

Level of

competitive fight

Low level of competitive fight because of special characteristics of a product and high level of concentration of the market

High level of competitive fight because of excess of volume of production capacities over requirement of the market

Active development of domestic market can become one of possible ways of increase in competitiveness of the Russian companies that will allow to load more production capacities of the companies and to reduce degree of dependence of the Russian companies on an environment of the world market. Besides, currently in Russia the ban of import to some agricultural production from Europe works. It means that goods of domestic production can fill the niche freed in the market. This circumstance will cause increase in demand for mineral fertilizers for increase in efficiency of agricultural activity in Russia.

On the basis of the carried-out analysis the main strategic problems of the mining and chemical companies of Russia and possible ways of their decision are presented in table 1.11.

Table 1.11

Strategic problems of the mining and chemical companies of Russia and way of their decision

Strategic problem

Decision prerequisites

Direction of increase in competitiveness

Mainly price competition in the market

The Russian mining and chemical companies possess potential sources for decrease in prime cost: active development of research and development, existence of own research institutes.

Development of effective transport and logistic infrastructure, increase in efficiency extracting and processing industry due to innovative solutions, continuous development of distributor network and logistic infrastructure.

Presence of competitors with the low level of expenses (except a potash segment)

Small possibility of differentiation of production

Possibility of access to all useful components for production of all types of mineral fertilizers.

Vertical integration of productions for release of all types of fertilizers. Conclusion of long-term contracts for supply of phosphoric, potash or nitric raw materials with the Russian mining companies

Strong dependence on an environment of the world market

Presence of potential consumers.

Imposition of sanctions that considerably will increase demand for domestic agricultural production. Possibility of the state support

Increase in a share of deliveries and active development of domestic market, reduction of prices for domestic agricultural manufacturers

Small volumes of deliveries to domestic market

Suspension of start of new projects in connection with an unstable situation in the market

High profits of the companies, existence of free monetary resources.

Investment into new objects for timely commissioning and obtaining additional volumes of production.

Destabilization of the market by some large companies

Increase in level of strategic management of the companies

Not system nature of development of mechanisms of state regulation in branch

Need of more intensive development of domestic market of mineral fertilizers Increase in inflow of investments into branch in the conditions of an economic crisis Need of reproduction of stocks

Increase in efficiency of investments and activization of innovative activity.

Thus, redistribution of a ratio of export and internal deliveries has to become the main directions of increase in competitiveness of the Russian mining and chemical companies that is caused by perspective increase in demand in domestic market in view of a political situation. The emphasis on increase in efficiency of production activity due to decrease in expenses is also necessary. Limitation of stocks of potash and phosphoric resources, growth of the population of the planet, limitation of land resources, a high capital intensity of branch and increase in demand for alternative energy sources (biofuel) will provide to the mining and chemical industry increase in demand in the long term.

Level of the state support of producers of mineral fertilizers, in our opinion, has no system character. State regulation of production of mineral fertilizers is carried out on the basis of a number of resolutions of the costs of carrying out research works (Appendix A) relating to all industries and providing subsidizing of a part. Also complex investment projects, and on the projects realized within the Chemical Complex program (Appendix B) are subsidized (compensation of a part of costs of payment of percent). There is an opportunity to use instruments of project financing, with participation of the state and in case of attraction of proceeds of credit no more than 80%/In 2015 the mechanism of subsidizing of a part of interest rates for the credits for replenishment of current assets is approved.

Partially the prospects of development of branch of producers of mineral fertilizers are reflected in the Strategy of development for a chemical and petrochemical complex till 2030 (Appendix B).

In total standard and legal base of support is directed, as a rule, to a complex of branches where the enterprises of the mining and chemical industry of support enter. Unfortunately, currently there are no documents of the regulating character and the strategic development having a target focus on producers of mineral fertilizers.

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