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European Ammonia Spiked as the Fertilizer Industry Lost its Balance Amid Energy Crisis

European Ammonia Spiked as the Fertilizer Industry Lost its Balance Amid Energy Crisis

European Ammonia Spiked as the Fertilizer Industry Lost its Balance Amid Energy Crisis

  • 25-Aug-2022 4:52 PM
  • Journalist: Patrick Knight

After easing in recent months, fertilizer costs have increased as gas prices rose due to limited Russian supply and demand-stoking heatwaves in Europe. Increasing gas costs have been the highest among European fertilizer producers. China's decision to limit exports and US and EU sanctions on potash sales from Belarus have also caused problems for the worldwide industries.

The following European manufacturers have recently announced plant closures: Grupa Azoty in Poland, Yara Ferrara in Italy, which produces Ammonia, Urea, and other NPK fertilizers, and Petrokemija in Croatia, which produces 50,000 tonnes of Urea. CF fertilizers, which had produced 1 million tonnes of Ammonia and Ammonium Nitrate, have announced a permanent shutdown.

If Russian natural gas is shut off, the ammonia shortage will worsen, and German authorities have expressed concern about the need for gas rationing during the winter. Some producers of chemicals and fertilizers are looking into less expensive non-European Ammonia. Last week, BASF SE stated that it was doing so as a "risk mitigation factor in the case of a substantial curtailment of natural gas quantities."

A report on the resumption of Freeport LNG prompted Henry Hub to crash, but it also maintained its high levels on Tuesday, briefly experimenting with the $10 mark in the early morning. After Russia's state-owned energy company Gazprom announced it would shut down Europe's single most significant piece of gas infrastructure for three days starting at the end of the month, natural gas prices in Europe spiked on Monday. Unplanned maintenance on the Nord Stream 1 pipeline, which connects Germany and Russia via the Baltic Sea, deepens a conflict over gas between Russia and the European Union and raises the likelihood of a winter shortage and a recession.

The price increase of gas, a crucial feedstock, has already reduced the capacity of nitrogen fertilizer production in Europe by 25%. Growing worries exist that the crisis will worsen. Ammonia production could fall even lower in Europe, increasing its import dependency. Ammonia is the primary ingredient needed to create nitrogen products.

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