Market experts expect fertilizer shortages in Europe due to a halt in production on the heels of natural gas price increases.
European countries are struggling with rapidly rising natural gas and electricity prices amid the energy crisis caused in part by the Russia-Ukraine war.
The price of natural gas per megawatt-hour (MWh) in Europe reached its highest level at €348 in August. Gas prices on the TTF, the Netherlands-based virtual natural gas trading venue, traded at €39 per MWh on average last year but €15 per MWh two years ago.
The increase in gas prices is profoundly affecting energy-intensive sectors in Europe, particularly the fertilizer industry.
As natural gas is used in large quantities to make fertilizers, many manufacturers in Europe have been pushed to change business practices, with some producers forced to either reduce or suspend production in fertilizer plants.
Brussels-based association Fertilizers Europe, which represents fertilizer manufacturers in the region, warned of the unprecedented crisis in the sector, especially since August.
Fertilizer production capacity in Europe reduced by two thirds as a direct result of high gas prices.
The Union called for urgent action to assist the sector as high natural gas prices caused the suspension of 70% of ammonia production in Europe.
Fertilizer is excluded in the scope of sanctions against Russia. However, the supply of fertilizers from Russia was interrupted due to sanctions imposed on the country in other areas, including banking, transportation and insurance.
Such developments are raising concerns of insufficient fertilizer supplies in European countries this year.
EU seeks solution
The decrease in fertilizer production and the increase in gas prices have come to the forefront of the agenda of European agriculture ministers.
The EU is continuing to work on various schemes, such as removing import duties on fertilizers and sourcing other countries for supplies like Canada.
After ministers discussed the issue in a meeting in Prague on Sept. 16, Zdenek Nekula, the minister of agriculture of Czechia, and the EU term president, announced fertilizer shortages in Europe and warned that this situation could cause a significant decrease in agricultural production.
Energy and fertilizer prices reached record levels leading to an "existential problem" for farmers, Nekula said.
"We have to fight high fertilizer prices and fertilizer shortages," he added.
Firms in Europe reduce ammonia production
Independent Chemical & Energy Market Intelligence (ICIS) data revealed the negative effects of rising gas prices on fertilizer production in Europe.
Norwegian chemical company, Yara, operating in Italy, France, Norway, and Germany and German ammonia producer, SKW, as well as German chemicals company, BASF, have reduced ammonia production.
In the UK, CF Fertilizers has already scaled down production and began plans to cease production, according to ICIS data.
In Spain, Fertiberia has closed some plants and lowered production in others. Yara and OCI have curtailed urea and ammonium production in the Netherlands, while Yara and BASF in Belgium have also restricted production.
In Poland, Grupa Azoty and Anvil reduced production. In Romania, Azomures' activity slowed. The Duslo company in Slovakia stopped production while Nitrogenmuvek suspended production in Hungary.
Agropolychim and Neochim companies closed in Bulgaria. In Croatia, Petrokemija's urea and ammonia production facilities closed. In Lithuania, Achema has suspended production while Lifosa has temporarily deferred production.
Ammonium price also on rise
The price of ammonium, the main element of nitrogen fertilizers, is also increasing rapidly in European markets.
A tonne of ammonium surged to $700 last year, from $230 two years ago.
After the start of the Russia-Ukraine war, the price of ammonium per tonne reached $1,300, resulting in sector players calling for measures to limit natural gas prices and provide urgent support to producers from the EU.
The EU imported 2.9 million tonnes of ammonia and 4.7 million tonnes of urea for nitrogen fertilizer production in 2021, with annual chemical fertilizers production of 18.3 million tonnes on average in Europe.