Things are rumbling with fertilizer producers in Europe. On Thursday, fertilizer manufacturer Yara reported that the company is cutting its ammonia production due to ever-rising gas prices. Other large European fertilizer manufacturers are also limiting production, and it is expected that this will not stop there.
In total, Yara, the largest fertilizer manufacturer in Northwest Europe, is reducing its ammonia production to just 35%. Yara expects this to reduce annual production capacity by a total of 3,1 million tons of ammonia and 4,0 million tons of finished products (1,8 million tons of urea, 1,9 million tons of nitrates and 0,3 million tons of NPK). Yara does indicate that where possible, the company will optimize its global purchasing and production system to meet customer demand, possibly with imported ammonia from outside Europe. In addition, Yara will continue to closely monitor the energy situation and adapt to market conditions in the future.
For these reasons, Yara had already temporarily closed its Ferrara factory in Italy and the Le Havre factory in France earlier this year, but also reduced production at other factories. Now it is the turn of the Dutch factory in Sluiskil and Tetre in Belgium. "The new reduction in production capacity will mainly take place in Sluiskil and Tetre in the coming days," Yara's spokesperson Brede Hertzenberg told AFP.
The factory in Sluiskil, Zeeland, produces ammonia in two large ammonia factories and a small one. This has been shut down since earlier this year, and now the production of the two larger factories is also being restricted. Even though the factories are relatively efficient, they are closed due to the high gas price in the Netherlands. Compared to other countries, the Dutch gas price is high. Fertilizer production continues partly with imported ammonia from outside Europe.
The whole of Europe is cutting back on ammonia production
It is not only the high gas price in the Netherlands that is squeezing the pipeline. Fertilizer factories elsewhere in Europe are also reluctant to produce at these high costs. After all, the fertilizer has to be sold and they see demand drop sharply when fertilizer prices rise even further. Last Wednesday, August 24, Grupa Azoty, Poland's largest chemical company, reported that it would significantly limit fertilizer production, citing the "extraordinary and unprecedented" increase in gas prices. That same Wednesday, CF Fertilizers UK, a subsidiary of CF Industries Holdings, also reported that it is also temporarily suspending its ammonia production due to high energy prices. Earlier this year, many chemical companies already cut their production capacity. Chemical giant BASF also did this last summer. But chemical giants outside Europe such as Fertiglobe Plc, the largest nitrogen producer in the Middle East and North Africa, also warn of worse conditions in Europe.
The shrinkage of ammonia supplies will only increase given the current gas price and the low volume of Russian natural gas flowing through the pipeline. Some chemical and fertilizer manufacturers are considering purchasing cheaper ammonia - which comes from outside the EU. But as soon as that happens, prices will rise sharply due to high demand, causing the fertilizer price in those countries to rise sharply.