Ammonia Producers Curtailing Production Amid Soaring Natural Gas Prices in Europe

Natural Gas prices in Europe have reached yearly high with the Natural Gas prices soaring 287% year to date. Title Transfer Facility Natural Gas Futures in the Netherlands which is the European benchmark jumped to Euros 72.20 per megawatt hour (MWh) on Wednesday, gaining almost 10% in a single day. UK Natural Gas Futures also surged around 10% on the same day. 

The prices have been driven by a supply shortage from Russia which has increased domestic consumption of its own Natural Gas. Other reasons for surging prices include lack of supplies from the USA due to Ida related disruptions and a heat wave in UK and other European countries which has disrupted wind power hence putting extra pressure on the Natural Gas demand. 

The rising feedstock prices has impacted margins for Ammonia producers deeply and therefore, there has been a series of plants halting Ammonia production since Wednesday. First was US fertilizer major CF Industries shutting down its two UK plants due to reduced margins. Now Yara has become the latest Ammonia producer to curtail production. 

Ammonia is one of the most efficient and widely used sources of nitrogen for plant growth. Ammonia is a basic building block for ammonium nitrate fertilizer. Ammonia is produced majorly by Haber-Bosch process and around 80% of Ammonia is consumed globally by the fertilizer industry. The global demand for Ammonia stood at around 170 million tonnes in 2020 and is expected to grow at a CAGR of 3.5%. 

As per ChemAnalyst, “the rising prices for Natural Gas in Europe are expected to sustain for the upcoming month since the heat wave and US supply disruption is yet to fade away. Russian supplies also are expected to further decrease therefore the prices will remain on an upward trajectory. This is expected to cause serious damage to Ammonia supply in Europe hence the prices of Ammonia are also expected to rise in the region.”