The European Union is Losing More and More Fertilizer Producers

After several arduous months of war in Ukraine, Russian aggression has begun to affect various economic sectors, including agriculture. Eastern Europe, as well as the rest of the continent, is facing a fertilizer crisis, and things could worsen further.

The number of fertilizer and chemical factories closing or reducing production in the European Union has been increasing lately, and with these gas prices, the list will likely continue to grow. According to data from the Independent Commodity Intelligence Service (ICIS), the EU is producing as much as 40 percent less urea. Food prices will also rise, which will inevitably create a tense atmosphere on the continent.

Hungarian producer Nitrogenmuvek Zrt, which is experiencing a yield drop of 15 to 20 percent this year, will struggle to cope with unfavorable conditions and rising prices in the long term, and many farmers have also had to reduce the use of nutrients due to high prices and supply issues. Additionally, drought has further worsened yield quantities this year.

The main reason for the unprecedented fuel prices is primarily due to the increased price of natural gas, a key raw material for their production. Sanctions on Belarusian potash and China’s move to curb supplies have also contributed to the crisis, and such moves pose a clear threat to global crop supplies that have been burdened by the war in Ukraine.

– Winter will be tense; everyone in the industry takes it for granted that there will be no gas supply – Zoltan Bige, Chief Strategy Officer of Nitrogenmuvek, stated to Bloomberg a few weeks ago.

It is worth noting that back in March, the Croatian chemical company Petrokemija closed two production facilities, and similar problems have been faced by European companies from Romania (Azomures), Lithuania (Achema), the United Kingdom (CF Fertilisers), and many others that have completely or partially closed their productions.

Additionally, the Hungarian government recently announced that the wheat yield in the country could fall below 4 million tons, which is about a third less than the five-year average. If European farmers continue to economize on fertilizers, this will jeopardize crops that should be planted in the fall and harvested in 2023 in the long term.

High gas prices pose a significant threat to the European fertilizer industry, Fertilizers Europe industry group stated last month. Nitrogenmuvek could soon be left without the assets necessary to continue operations.

– We will not have reserves for a possible negative scenario, which is most likely an increase in gas prices or potentially unplanned maintenance – concluded Bige.