The fertilizer market is currently in a period of uncertainty, with little direction visible. The main reason for this is the Carbon Border Adjustment Mechanism (CBAM), which will take effect on January 1, 2026. This new European regulation is intended to ensure that importers of fertilizers, among other things, pay for the amount of CO₂ released during production, so that European producers are not disadvantaged by cheaper, but more polluting, imports.
In practice, the implementation is causing considerable confusion. A growing number of farmers are requesting information, yet they remain reluctant to purchase fertilizer. Importers don't know the exact levy amount because the emission factors, the standards that determine how much CO₂ is included in each product, haven't yet been established.
Without these fixed values, it's impossible to calculate how many CO₂ allowances must be purchased, or what the additional cost per tonne will be. There's talk of using a standard value per product group, but that hasn't been finalized yet. As a result, no one can accurately estimate the price increase that will have to be passed on from 2026 onwards.
Low raw material prices no reason for price reduction
As if that weren't complicated enough, the European Commission has announced that the price of CO₂ will not be determined via a daily spot market, but via a fixed quarterly price. This price will only be announced after the end of the quarter. For importers, this means they can purchase products in January without knowing the final CO₂ price at which they will be paid. Consequently, they can only determine their actual costs after the fact, a situation that is hardly feasible in a trading market.
The uncertain pricing method makes importers cautious in their purchases. No one wants to enter into contracts with unknown costs. As a result, fertilizer imports are stagnating, and this reluctance is having a direct impact on the market.
European producers are responding by maintaining their prices, partly because they are already trying to factor in the expected levy, it's said. This creates a striking contrast: while gas prices remain stable and global commodity prices are low, fertilizer prices remain high.
Under normal market conditions, you'd expect prices to fall as a result. Fertilizers are unaffordable, gas is inexpensive, and supplies are plentiful. Yet, prices haven't fallen any further, purely due to the uncertainty surrounding CBAM.
Farmers' purchasing behavior cautious
Product yields are under pressure, especially for arable farmers, while cultivation costs remain relatively stable. Fertilizer prices already indicate that little change is expected for the coming growing season.
Farmers' willingness to buy is increasing slightly, as they still need fertilizer for the remainder of the season, but demand remains limited. Lower wheat prices below €190 per ton and stable fertilizer prices are further dampening buying behavior. Traders are holding firm to their quotes, and price differences arise primarily from volume discounts, keeping the market calm for the time being.
Currently, the price for greenhouse gas is approximately 10-15% higher than during the same period last year. Due to the ongoing uncertainty surrounding CBAM and importers' reluctance, the price could remain stable in the short term or even rise further if producers pass on the expected levies. At the same time, farmers' limited willingness to buy is limiting the increase, meaning major fluctuations are unlikely.