There is panic in the fertilizer market. Fertilizer producers are at a loss because of the current gas prices. It is only a matter of time before new record prices are paid for nitrogen fertilizers.
Anyone who has been able to do business for less than €670 per tonne of KAS in recent months seems to have done well. With the current gas price, making nitrogen-containing fertilizers has become more expensive than at the beginning of this year. It is the middle of summer, but on Thursday, August 11, a new record price was recorded on the TTF Gas Futures, a price of €212,35 per MWH. Meanwhile, KAS prices have been rising sharply for several weeks and you are already paying €850 per tonne of KAS from various suppliers. Those who are lucky may pay a little less because there are still some supplies left, but it won't be long before they run out.
Big risk
For a while, the fertilizer market seemed to cool down after a year of high prices. Russia talked about easing sanctions on importing fertilizers from Russia and Belarus. Because of the agreements on the Ukrainian grain corridor, Russia saw the lifting of these sanctions by the EU as a good return. Nothing turned out to be further from the truth, because the import of Russian fertilizers into Europe remains sanctioned. What is special is that Russian fertilizers are allowed in Central/Latin America and the US. India and Turkey are also allowed to import fertilizers.
Europe can purchase some of the fertilizers elsewhere, such as in North Africa, but the price is also high there. Europe is used to producing itself, but with current gas prices this entails a lot of risk. Ammonia production at the end of July was already more than 30% lower than normal at this time. Fertilizer producers no longer dare to take the risk of producing with these high gas prices. The price fluctuates a lot, so they may be able to produce at lower costs within a short time. At the same time, costs can also increase, as has been the case in recent weeks. A buyer must also be found for these prices and that seems to be difficult when €1.000 or more per tonne of KAS will soon have to be paid.
The fertilizer market for potassium- and phosphate-containing fertilizers is also under pressure. The fertilizers mainly come from Russia and Belarus. They account for 40% of the world's potash production. Comparatively, the EU produces a handful and that little is for the food industry, not for the production of fertilizer. Scarcity prevails in these markets, which also causes the price to rise. It is expected that prices for potash and phosphate fertilizers will stabilize at this high level due to the expected supply and demand.
Who's going to pay for this?
Due to the risk, fertilizer producers only produce and sell small volumes, which also means that the wholesaler's stock is minimal. The sales price is also unstable. Traders expect price increases quickly, as was already the case last week. Wholesalers report that this makes purchasing difficult and that they also run a lot of risk. They also ask the question how high the ceiling is, who wants to pay for it?