https://archive.ph/PjIUN
Ammonia is used to make nitrogen fertilizers, and prices are spiking as manufacturers grapple with dramatically higher costs for their main feedstock. That means added pressure on farmers, who may have to decide whether to pay up or cut fertilizer usage in spring, and could add to global food inflation.
Disruptions to ammonia supply can also have wider implications -- the process produces carbon dioxide as a byproduct and U.K. food and livestock producers were thrown into crisis last week when two fertilizer plants closed, slashing CO2 supplies. So far, that doesn’t seem to be playing out elsewhere in the region.
About half of the continent’s ammonia capacity is probably at risk of shuttering or curtailing production, or already closed, according to CRU Group. Average site costs for ammonia have surged, from about $188 a ton in the fourth quarter of 2020 to more than $900 likely in the last three months of this year, said CRU head of fertilizers Chris Lawson.
Austria-based Borealis said Thursday it’s cutting production of ammonia in Europe and will “further analyze the situation” regarding its plants in Austria, France and the Netherlands, without giving more details. Norway’s Yara International ASA is already cutting about 40% of European ammonia capacity. And while CF Industries Holdings Inc. agreed to reopen one of its U.K. plants on an interim basis, it’s likely to require sharply higher prices to keep running.
“This is an ongoing story. All the nitrogen producers in Europe will be reviewing what they do,” said Allan Pickett, head of analysis at IHS Markit’s fertilizer group, Fertecon. “With gas prices where they are, we would confidently expect that there will be significant pressure on many of the ammonia producers related to the fertilizer industry.”
While fertilizer prices will remain under pressure as long as natural gas keeps rallying, at some point farmers may refuse to buy or Europe will increase imports, Pickett said. Many European growers will already have sourced the fertilizer they need for now, so the current crisis is more likely to affect spring fertilizer applications.
The move by Borealis, one of the top-five nitrogen fertilizer producers in Western Europe, suggests that the industry has driven crop-nutrient prices as high as they can, said Bloomberg Intelligence analyst Jason Miner.
“Clearly they’re running close to margins, otherwise they wouldn’t have shut down,” he said. It’s “pretty likely that other plants will shut down unless natural gas prices change.”
— With assistance by Morten Buttler, Lars Paulsson, Francois De Beaupuy, and Eddie Spence
Europe’s Fertilizer Crisis Spreads After Another Firm Cuts Output
Another European fertilizer producer, Borealis AG, is reducing output and more are expected to follow as surging natural gas prices squeeze profit margins in an industry already facing tight supply.Ammonia is used to make nitrogen fertilizers, and prices are spiking as manufacturers grapple with dramatically higher costs for their main feedstock. That means added pressure on farmers, who may have to decide whether to pay up or cut fertilizer usage in spring, and could add to global food inflation.
Disruptions to ammonia supply can also have wider implications -- the process produces carbon dioxide as a byproduct and U.K. food and livestock producers were thrown into crisis last week when two fertilizer plants closed, slashing CO2 supplies. So far, that doesn’t seem to be playing out elsewhere in the region.
About half of the continent’s ammonia capacity is probably at risk of shuttering or curtailing production, or already closed, according to CRU Group. Average site costs for ammonia have surged, from about $188 a ton in the fourth quarter of 2020 to more than $900 likely in the last three months of this year, said CRU head of fertilizers Chris Lawson.
Austria-based Borealis said Thursday it’s cutting production of ammonia in Europe and will “further analyze the situation” regarding its plants in Austria, France and the Netherlands, without giving more details. Norway’s Yara International ASA is already cutting about 40% of European ammonia capacity. And while CF Industries Holdings Inc. agreed to reopen one of its U.K. plants on an interim basis, it’s likely to require sharply higher prices to keep running.
“This is an ongoing story. All the nitrogen producers in Europe will be reviewing what they do,” said Allan Pickett, head of analysis at IHS Markit’s fertilizer group, Fertecon. “With gas prices where they are, we would confidently expect that there will be significant pressure on many of the ammonia producers related to the fertilizer industry.”
While fertilizer prices will remain under pressure as long as natural gas keeps rallying, at some point farmers may refuse to buy or Europe will increase imports, Pickett said. Many European growers will already have sourced the fertilizer they need for now, so the current crisis is more likely to affect spring fertilizer applications.
The move by Borealis, one of the top-five nitrogen fertilizer producers in Western Europe, suggests that the industry has driven crop-nutrient prices as high as they can, said Bloomberg Intelligence analyst Jason Miner.
“Clearly they’re running close to margins, otherwise they wouldn’t have shut down,” he said. It’s “pretty likely that other plants will shut down unless natural gas prices change.”
— With assistance by Morten Buttler, Lars Paulsson, Francois De Beaupuy, and Eddie Spence
