European countries are struggling with the energy crisis caused by the rapidly increasing natural gas and electricity prices after the Russia-Ukraine War.
The prices of futures contracts traded in the TTF, where reference prices are determined in the European gas market, reached a record high of 348 euros per megawatt-hour in August. Gas prices in this market were 39 euros on average last year, and 15 euros 2 years ago.
NATURAL GAS PRICES HIT FERTILIZER PRODUCTION
Gas prices, which increased more than 20 times compared to the pre-crisis period, deeply affected the energy-consuming sectors in Europe. The fertilizer industry was also one of the sectors most affected by this situation.
The rapid increase in the cost of natural gas, which is among the main inputs in fertilizer production, has recently led many fertilizer factories in Europe to reduce or suspend production.
Brussels-based association Fertilizers Europe, which represents fertilizer manufacturers in Europe, announced that there has been an unprecedented crisis in the sector, especially since August.
The union stated that the production of ammonia, which is the active main raw material and additive in fertilizer production, came to a standstill and demanded urgent measures be taken. Fertilizer production capacity in Europe fell by 70 percent due to high natural gas prices.
ICIS data serving commodity markets also highlighted the impact of rising gas prices in Europe on fertilizer production. Accordingly, Yara firm in Italy, France and Norway, and SKW, Yara and BASF firms in Germany reduced ammonia production. In the UK, CF Fertilizers reduced production and began plans to cease production.
In Spain, Fertiberia has closed some plants and reduced production. In the Netherlands, Yara and OCI reduced urea and ammonium production. In Belgium, Yara and BASF have restricted production.
Grupa Azoty and Anvil reduced production in Poland, Azomures slowed down its activities in Romania, Duslo company in Slovakia stopped production, and Nitrogenmüvek in Hungary suspended production.
Agropolychim and Neochim companies in Bulgaria and Petrokemija’s urea and ammonia production facilities in Croatia were closed. In Lithuania, Achema suspended production, Lifosa suspended production for a while.
AMMONIUM PRICES ARE RISING
Due to the crisis, the prices of ammonium, the main element of nitrogen fertilizers, are increasing rapidly in European markets.
While it was $230 a tonne of ammonium two years ago, it went up to $700 last year. After the war, this rise gained momentum and reached the level of 1300 dollars in the current situation.
The sector demands from the EU to take measures to limit natural gas prices and to provide urgent support to producers.
According to the data, 18.3 million tons of chemical fertilizers were produced annually in Europe in the pre-crisis period. 72 percent of this was recorded as nitrogenous, 13 percent phosphate and 15 percent potash fertilizers. The EU imported 2.9 million tons of ammonia and 4.7 million tons of urea for the production of nitrogen fertilizers in 2021.
On the other hand, potassium imports from Belarus were banned within the scope of the post-war EU sanctions.
Fertilizer was not included in the scope of the sanctions against Russia, but the supply of fertilizer from Russia was interrupted due to sanctions in areas such as banking, transportation and insurance.
In line with these developments, it is predicted that there will not be enough fertilizer in European countries this year.
EU SEEKING SOLUTIONS
The decrease in fertilizer production and the increase in prices remain on the agenda of the agriculture ministers of EU countries.
After the meeting held in Prague on 16 September on the coordination of food safety, Zdenek Nekula, Minister of Agriculture of Czechia, the rotating EU presidency, announced that there is not enough fertilizer in Europe and this situation may cause a significant decrease in agricultural production.
Nekula said that energy and fertilizer prices have reached record levels and that this has become an “existential problem” for farmers. “We have to combat high fertilizer prices and fertilizer shortages.” had used the phrase.
The EU is working on plans to remove import duties on fertilizer and supply fertilizer from countries such as Canada to solve the problem.