Europe’s fertilizer supply tightens
Europe’s fertilizer crunch tightened after Yara International ASA cut output in the face of soaring gas prices, putting more pressure on food supplies as a cost-of-living crisis intensifies.
The Norwegian producer said it’s further cutting its ammonia capacity to about a third, adding to a flurry of European fertilizer curbs and shutdowns announced this week. Industry researcher CRU Group estimates that Europe has now lost about half its ammonia capacity and 33 per cent of its nitrogen fertilizer operations.
Russia’s squeeze on flows of gas — a key feedstock for fertilizers and source of power for heavy industries in Europe — is hitting everything from aluminum smelters to sugar refineries. Consumers, already feeling the pain in higher energy bills, are likely to be hit again as shrinking fertilizer supplies boost the cost of farm inputs and lower productivity by curbing the use of key crop nutrients. That could reignite food inflation.
“This unrelenting pressure on food prices is just not going to go away,” Chris Elliott, professor at Queen’s University Belfast and a food security expert, said by phone. Fertilizer makers in Europe have been hit hardest because of the region’s reliance on Russian gas. The industry must also contend with U.S. and European Union sanctions on potash sales from Belarus and China’s move to rein in shipments. Trade in Russian nutrients has suffered from many shippers, banks and insurers self-sanctioning and difficulties in servicing exports from Russia, a big supplier of every major type of crop nutrient.
If gas prices remain high and fertilizers costs increase into the new planting season, demand from farmers could fall, according to Michael Magdovitz, a crop analyst at Rabobank in London.
“The impact of a continued crunch will stress wheat and corn farmers and potentially constrain acreage and yield potential,” he said by email. Yara said it’s cutting its ammonia utilization to about 35 per cent, with the latest reductions bringing total curtailments to an equivalent of 3.1 million tons of ammonia and four million tons of finished products across its production system in Europe. Gas is the top input for most nitrogen fertilizer, including ammonia.
The cutbacks by Yara come a day after CF Industries announced it will stop ammonia production at its remaining U.K. plant. Achema AB, Lithuania’s top fertilizer company, will temporarily halt ammonia output in September, while Hungary’s sole producer, Nitrogenmuvek Zrt., stopped output in early August. Earlier this week, Grupa Azoty, Poland’s largest chemical company, also trimmed ammonia output and Anwil, a unit of oil company PKN Orlen SA, halted production.