Major Fertilizer Plant Closures in Europe Instil Price Rise and Threat to Food Supply

USA’s multinational fertilizer enterprise, CF Industries Holdings Inc., on Wednesday announced the discontinuation of two of its production facilities in Billingham and Ince, UK, without any intimation of its plans for future resumption. The shutdown was brought into effect in the wake of surging natural gas prices that has led to its acute shortage in the country and other European regions from the past few weeks. These plants, which employed a workforce of 600 people, accounted for 40% of the total fertilizer supplies to the UK market. 

Yara International, the world’s biggest fertilizer producer, has also expressed concern over the surging natural gas prices and has, today, announced to curtail down 40% of ammonia production at its Norway plant. The shutdown of production facilities by big market players has created panic in the fertilizer market which expects other European producers to follow suit.

Ammonium Nitrate and Calcium Ammonium Nitrate are the most widely used fertilizer products that are prepared from ammonia. Natural gas serves as a feedstock for the generation of ammonia which is a major raw material for all nitrogen-containing fertilizer compounds. Prices for Ammonium Nitrate was already 50% higher than last year prices amid global supply constraints. The shortage in natural gas supplies has made fertilizer production further difficult, as the final product cost is unable to compensate for the production cost.

Low production of ammonium nitrate and other fertilizer products will be soon reflected in their prices that are bound to soar making their purchase by farmers non-feasible. Wholesalers are avoiding the purchase of fertilizer stocks for the next year’s spring usage in the hope to see a downfall in the prices.

As per ChemAnalyst, the loss of more than half of fertilizer production volume for an indefinite period is bound to create a very high deficit in their supplies in the market, eventually causing the prices to escalate higher than ever. At the global level, the repercussions of the unaffordable fertilizer prices would be seen in the form of low crop production and subsequently, low food supply in the following year. With the surging demand for Ammonium Nitrate in the European region, its price is not expected to take a downward trend until the natural gas prices get stabilized.