European gas prices keep rising, two fertilizer giants join the tide of production cuts

With supply dwindling and winter approaching, European benchmark Dutch natural gas futures hit a new record as high as €300/MWh on August 24

In the face of rising gas prices, the world's two largest fertilizer giants, CF Industry and Yara International, have recently joined the European fertilizer production reduction wave.

CF Industries UK plant suspends ammonia production

Fertilizer giant CF Industries announced on August 24 that it would suspend ammonia production at its only UK plant, Billingham, in response to soaring gas prices

The Billingham plant is a major source of carbon dioxide in the UK, a move that could reduce the supply of carbon dioxide vital to the UK food industry

CF Industries believes that producing ammonia in the UK is uneconomical at current gas and carbon prices, with marginal costs in excess of £2,000 per tonne, and global ammonia prices are around half that level

Due to high energy costs, CF Industries announced on June 8 that it plans to permanently close its Ince plant in the UK and concentrate UK manufacturing operations at the Billingham plant, the UK's largest producer of ammonia, ammonium nitrate and carbon dioxide.

The Billingham plant was established in 1924 with a total ammonia production capacity of 595,000 tons and ammonium nitrate of 625,000 tons; the Ince plant was established in 1965 with a total ammonia production capacity of 380,000 tons and ammonium nitrate of 575,000 tons

The shutdown of CF is reminiscent of a year ago

Yara further cuts production in Europe

Norwegian fertilizer giant Yara announced on August 25 that it is implementing further production cuts due to record natural gas prices in Europe, which will bring its total ammonia production capacity utilization in Europe down to around 35%

Accordingly, Yara will reduce the annual capacity of its European production system by the equivalent of 3.

　　Yara said it will leverage its global sourcing and production systems wherever possible to optimize operations and meet customer needs, including continued nitrate production using imported ammonia where feasible

　　This is not the first time Yara has cut production this year

　　According to the S&P Global Chemical Economics Handbook (CEH), CF Industries and Yara International lead the way in terms of total global ammonia production capacity, with a combined capacity of more than 16 million tonnes/year in 2020

　　Natural gas is an important raw material for the production of nitrogen fertilizers in European fertilizer plants, accounting for the bulk of the production cost of synthetic ammonia

　　The energy crisis has curbed European fertilizer production, which means less production and more reliance on imported ammonia, opening opportunities for fertilizer producers in other regions

　　However, this has had a negative impact on global food production