European fertilizer production has still not fully recovered from last year's production cuts. Then the manufacturers pulled the emergency brake due to the rapidly rising gas price, resulting in a drop in production of 70%. Even in the current market environment, with a gas price that is still volatile at a lower level, the challenges in production are not over yet.
The European fertilizer industry - and especially the production of nitrogen fertilizer - has continued to recover in recent months from the production restrictions that have been in place since 2021. The high natural gas prices, which rose rapidly at the time and which have gone through the roof since the Russian invasion of Ukraine in February last year, made the production of ammonia and nitrogen fertilizer virtually unprofitable. The price of natural gas has now fallen considerably, but is still at a relatively high level and is also erratic. With winter approaching and with it more demand for gas, the natural gas price does not appear to be becoming more stable.
To date, the import of ammonia, one of the raw materials for the production of nitrogen fertilizer, has meant that nitrogen fertilizer can still be produced within Europe at reasonable prices. Production is accelerating slower than normal. Producing ammonia yourself is not easy given current natural gas prices. Various fertilizer manufacturers cut production significantly or shut down entire factories, as fertilizer producer Yara did last year with the ammonia factory in Sluiskil. The German chemical giant BASF even permanently closed a fertilizer factory as a result of natural gas prices.
Restrictions lifted
Many of the ammonia and fertilizer production restrictions have now been lifted. For example, fertilizer manufacturer Yara reported after figures for the second quarter of 2023 that the production capacity of finished fertilizer was only 0,4 million tons behind their total capacity. In the first quarter, this production was still 1,3 million tons behind due to the restrictions. Ammonia production had already recovered in the second quarter to 87% of their total European production.
With the still volatile natural gas price, things could look very different in the coming months for our own ammonia production. Moreover, a lot of natural gas is also needed for the production of fertilizer and not just for ammonia. The Dutch TTF also made significant jumps last week. This, together with the higher demand for natural gas this winter, could cause European production costs for fertilizer to rise sharply again. It should therefore come as no surprise that fertilizer manufacturers are moderating production again.
Trade is calm, nitrogen fertilizer is rising slightly
Like all other years, the fertilizer trade in the Netherlands is quiet at this time of the year. Some farmers are already committing to something for next season, but this total volume is not large. Traders and sellers advise buyers to spread the risk next season, just like last year. In terms of current fertilizer prices, potash has fallen sharply in recent months. Nitrogen fertilizer has actually increased slightly in recent weeks. According to Farmers4All price quotes, lime ammonium nitrate (KAS) is traded for €34,80 per 100 kilograms, supplied in big bags of 600 kg. That is more than €4,50 more than a few weeks ago. Kali60 costs €47,80 per 100 kilograms, which is considerably lower than the €70 that had to be paid ten weeks ago. Triple superphosphate 45% is trading for €51,80. Prices may vary slightly per customer.