The fertilizer shortage is not a new story, but in Europe it is heading deeper.
Rising gas prices are making the business of producing nitrogen fertilizer in Europe a losing proposition. Europe has cut its nitrogen fertilizer capacity by a quarter because of the soaring price of natural gas, its main feedstock, Platts estimates. In the future, more capacity is likely to be shut down.
Large fertilizer makers such as Yara, the world's largest crystalline fertilizer maker, and K+ S, a leading German fertilizer company, have recently warned of further curbs on production at European plants.
Chris Lawson, head of fertilizers at Platts, said it was hard to see how anyone could continue to produce in Europe other than those that had successfully hedged their gas costs. He added that the price of ammonia would continue to rise.
Shortage of nitrogen
In modern agriculture, chemical fertilizers have always been the key to yield. According to the product, fertilizer can be divided into nitrogen fertilizer, phosphorus fertilizer, potassium fertilizer and compound fertilizer four big industries. The fertilizer that Europe is suffering from is mainly nitrogen.
Nitrogen fertilizer mainly uses coal and natural gas as feedstocks. Typically, one ton of nitrogen fertilizer uses 1.5 tons of coal or 615 cubic meters of natural gas. Coal or natural gas is converted to ammonia, which is then synthesized into urea, the main fertilizer for nitrogen fertilizer.
A shortage of natural gas has caught nitrogen production by the scruff of the neck.
Platts' Lawson further explained that Europe, which produces about 20 million tonnes of ammonia a year, now needs to import 200,000 tonnes of new ammonia a month as production declines, and could need to import more in the future.
Lukas Pasterski, a spokesman for the European Fertilizer Company, an industry body, said another spike in natural gas prices would lead to an increase in fertilizer imports, but much would depend on availability and prices on the global market.
Agriculture was injured
The world's farmers are likely to cut their fertilizer use by 7% next season, the biggest drop since 2008, according to a warning from the International Fertilizer Association. It also means significantly lower harvests and a significantly higher risk of food crises.
It goes on to warn that if European farmers import more fertilizer, it will tighten global markets, particularly in fragile agricultural markets. The biggest drop in fertilizer use over the next quarter is expected to be in sub-Saharan Africa, where the decline is expected to be up to 23 per cent.
Bert Frost, senior vice president of sales at CF Industries Holdings, a major producer of nitrogen fertilizer, is also worried that the shortage could mean food shortages later this year and in 2023, which could be even more desperate for some countries.
Martin Brudermueller, chief executive of BASF, Germany's largest gas consumer and fertilizer supplier, also said it might reduce ammonia production to save gas.
Next year, he concludes, ammonia prices will rise so strongly that farmers will have to buy less and expect fewer harvests. Poorer countries, in particular, will suffer greater food shortages.
Article source: Financial Union News Agency
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