European Union Ramp Up Efforts to Combat Soaring Fertilizers Prices

On 30^th November, the European Parliament Committee on Agricultural and Rural Development conveyed their views on farmers facing Fertilizers record prices in the EU with the European Commission representatives from DG Agriculture. As the gas represented 80% of the industry’s operating costs, the soaring gas prices led to the curtailed operational load at production sites across Europe and significantly hiked the input costs for farmers, especially in October.

The hiked natural gas prices in Europe led to the widespread production cutbacks in Ammonia in response the offers for Urea soared by 150% during Q3 2021 compared to Q3 2020. Whereas, due to the coal shortage, China suspended the exports of all fertilizers till June 2022 to ensure domestic availability amid food security concerns. As a ripple effect, it impacted one-third of global DAP trade and one-tenth of the global Urea trade. In addition, Russia recently announced to restrict the exports of nitrogen and phosphate-based fertilizers for a tenure of 6 months effective from early December.

The Director-General of Fertilizers Europe “Jacob Hansen” elucidated some key epilogues such as “A coordinated short-and long-term actions across the value chain is much needed to avoid a coming winter crisis with damaging gas spikes causing further stresses on Fertilizers production and supply to the farmers. Whereas the majority of industrial operating cost is dependent on gas prices, and the ongoing bullish trend moved the EU fertilizers sector into the loss-making situation”. He further added that “the Non-European producers had access to low priced gas. Therefore, the current anti-dumping measures applied on the imports of nitrogen fertilizers UAN from Russia, USA, and Trinidad and Tobago is a subject of scrutiny and calls for a temporary suspension, as this would further undermine the competitiveness of the EU versus Non-EU producers while at the same time bringing hardly and relief to European farmers”.

During the second quarter of 2021, several Economists forecasted the ascending price trend of Fertilizers by analyzing the pace of capacity expansion, geopolitical tensions, and environmental policies on fertilizers use. In addition, weighing the impact of COVID-19 related shutdowns led to higher input costs from raw materials such as Sulphur and Ammonia against the strong demand from the key crop-growing regions are the major driving force. Whereas, currently most of the Fertilizers rose sharply in Q3 2021, and persisted its trend into the Q4 2021 matching levels similar to the 2008-2009 global financial crisis.

As per ChemAnalyst, it is anticipated that the prices for Urea are likely to decline marginally in 2022, as the feedstock cost eases. However, DAP is likely to remain elevated in the European market throughout H1 2021 by weighing on the Chinese exports restrictions. MOP contracts prices are expected to surge in 2022, taking cues from the hiked spot offers.