Soaring prices of gas, a key feedstock, have already curtailed a quarter of Europe’s nitrogen fertilizer capacity, CRU Group estimates. Now, worries are mounting that the crisis will worsen. For Europe, that could mean even less production and more dependence on imports of ammonia, from which nitrogen products are made.
That will also have a knock-on impact elsewhere. Faced with higher prices and tighter supplies, farmers may cut global fertilizer usage as much as 7% next season, the most since 2008, the International Fertilizer Association warns. That risk curbing harvests as the world grapples with a cost-of-living crisis and worsening hunger.
“If European farmers import more products from other exporters, then for the more fragile agricultural markets in sub-Saharan Africa, South Asia and parts of Latin America, this will make the global market tight,” IFA Director of Market Intelligence Laura Cross said.
The biggest drop in fertilizer usage next season will be in sub-Saharan Africa, with a decline of as much as 23%, the IFA says.
After easing in previous months, fertilizer prices have started rising again, as gas rallied on the back of reduced supplies from Russia and European heat waves that have stoked demand.
European fertilizer makers have been hit hardest by high gas prices. The global sector has also contended with US and European Union sanctions on potash sales from Belarus and China’s move to rein in shipments. Plus, trade in Russian nutrients has suffered from many shippers, banks and insurers self-sanctioning and difficulties in servicing Russian exports.
It’s currently much cheaper to import ammonia into Europe than to make it there, according to CRU.
“I don’t see how anyone is continuing to produce in Europe, outside of those who have hedged” gas costs, said Chris Lawson, CRU’s head of fertilizers. “We are expecting ammonia prices to continue to grow.”
Europe — which produces about 20 million tons of ammonia annually — needs to import another 200,000 tons a month to ease the crunch, according to Lawson. Some relief could come from shipments from the Black Sea region in the months ahead, he said.
Surging gas prices since June mean “curtailment and shutdowns are again happening,” said Lukas Pasterski, a spokesman for industry body Fertilizers Europe. “In principle this would lead to higher imports, but much depends on the availability and price of fertilizers on the global market.”
For now, the nitrogen market is going to remain very tight, Bert Frost, senior vice president of sales at major producer CF Industries Holdings Inc., said last week. Limited supply means some food shortages possibly later this year and into 2023, he said.
The crunch closed or cut output at 10 of the Europe’s fertilizer plants in July alone, and things could get worse from here.
CRU said that the amount of the region’s nitrogen capacity that has been curtailed — currently at least 25% — is likely to rise. Fertilizer makers Yara International, K+S AG, Borealis AG and Fertiglobe Plc have also recently warned about further output curbs across Europe.
Worries are mounting that there won’t be enough fertilizer for next year. Sean Finan, who runs a beef farm in Ireland’s County Roscommon and who needs nutrients for his pastures, is one who’s considering securing supplies earlier than usual.
“All indication is that prices will be high,” said Finan, who may take up a subsidy incentive from his cooperative. “Availability would be an important factor too. I don’t want to get caught in a waiting list in February when I need to apply it.”