While supply is decreasing and winter is approaching, on 24/8/2022 the price of European natural gas on the Danish market has reached a record high of 300 EUR/MWh.
In the face of an increased natural gas price warning, the world’s two leading fertilizer producers, CF Industry and Yara International, recently joined the trend of production cuts in Europe. Observers predict that in the near future, many other manufacturing companies here will have to cut output.
Cut production in the UK
On August 24, 2022, CF Industry Company in the UK announced that it would suspend ammonia production at its plant in Billingham (UK), causing natural gas prices to soar. This is the Company’s only ammonia plant in the UK. The plant is also an important source of CO2 for the UK food industry.
CF Industry believes that ammonia production in the UK has become uneconomical at current natural gas prices. The Company’s production costs have exceeded £2,000/ton of NH3, while the selling price of NH3 on the world market is only half that amount.
Due to high energy costs, in early August 2022, CF Industry also announced that it would permanently close its factory in Ince (UK) and production activities at the
Billingham factory – the NH3 production base. The largest NH4NO3 and CO2 in the UK.
The Billingham factory was built in 1924, with annual output of 595,000 tons of NH3 and 625,000 tons of NH4NO3. The Ince factory was built in 1965, reaching an annual output of 380,000 tons of NH3 and 575,000 tons of NH4NO3.
The closure of factories by CF Industry Company reminds
many people of the situation 1 year ago. In September 2021, these two plants of the Company in Billingham and Ince had to suspend production due to the high price of natural gas causing their operations to be at a loss. After that, the factory in Billigham restarted production thanks to the approval of the British government. But the factory at Ince was never reopened.
Euro area countries
On August 25, 2022, Yara Company – a large-scale fertilizer producer in Norway – announced that it would continue to cut production of record-high natural gas prices in Europe. The Company’s capacity utilization ratio in ammonia production in Europe will be reduced to approximately 35%.
Corresponding to that reduction, Yara’s annual European polarizer production capacity will be reduced by the equivalent of 3.1 million tons of NH3 and 4 million tons of finished products (1.8 million tons of urea, 1.9 million tons of urea, 1.9 million tons) million tons of nitrate, 300,000 tons of mixed NPK fertilizer).
Director of Yara Company said, the Company will use its global purchasing and production system to the fullest extent to optimize operations to meet customer needs, including the use of imported NH3. to continue to produce NH4NO3 if feasible.
This is not the first time Yara has cut production this year. In March 2022, the Company cut production at some ammonia and urea production facilities, but after the profit situation improved, the Company resumed production at those facilities.
According to the S&P Global Chemical Economy Handbook, companies CF Industry and Yara are leading producers of NH3 in the world, with a combined 2020 capacity of more than 16 million tons.
Natural gas is an important input for polarizer production at European polarizer plants, accounting for most of the production cost of NH3. On August 23, 2022, Poland’s state-controlled Grupa Azoty and its subsidiary PKN Orlen had to suspend polarized production due to high natural gas prices.
The energy crisis has acted to block manure exports in Europe, making the continent more dependent on imported NH3, opening opportunities for manure producers in different regions.
However, the situation also has a negative impact on global food pro
duction. Ac
cording to a warning from the International Discrimination Association (IFA), farmers around the world are trending to cut their use of segregation by an average of 7% in the coming season. This is the largest cut since 2008. That means grain production will fall significantly in the near term, greatly increasing the risk of a world wage crisis.
Source : Chemical Industry Newsletter No. 4(November 2022)