Rising Gas Prices Threatening European Fertilizer Sector

European companies are suffering as a result of Russia's restrictions on gas supply following its invasion of Ukraine

FREMONT, CA: With more than two-thirds of production capacity stalled by rising gas prices, Europe's fertiliser shortage worsens and endangers farmers and consumers worldwide. European companies are suffering as a result of Russia's restrictions on gas supply following its invasion of Ukraine. As gas serves as the industry's primary feedstock and a source of electricity, fertiliser industries are particularly impacted.

After reaching multi-year highs following Russia's attack, wholesale fertiliser prices began to decline, but now they rise once more as European Union manufacturers reduce capacity. A business that analyses crop nutrient data for Bloomberg, ammonia costs have increased significantly in Western Europe over the last two years.

With dwindling supplies, prices will continue to rise, endangering production as farmers are compelled to use less of the essential vitamin. As food inflation picks up, consumers will feel the effects of that. According to the chief economist of the UN Food and Agriculture Organisation, additional European facilities will be forced to close if natural gas prices continue to rise. As a result, the EU will shift from being a major exporter to an importer, which will increase pressure on fertiliser costs and impact the following planting season.

Since Europe depends so heavily on Russian gas, European fertiliser manufacturers have been severely influenced. Many shippers, banks, and insurers self-sanctioning, as well as challenges in servicing shipments from Russia, a significant provider of every major type of crop fertiliser, have hurt trade in Russian nutrients. The effects of the supply shortage will expand as Europe becomes a net fertiliser importer. The region will have to compete for limited resources with poorer countries, particularly in Africa, where recurring droughts and violence worsen food shortages.

According to the International Fertilizer Association, fewer crops might result from a seven per cent fall in worldwide fertiliser next season, the worst loss since 2008. Millions of people in Africa already face hunger. Shutdowns of nitrogen plants in Europe are not only a European concern. The availability of plant nutrients in Europe and elsewhere will be under pressure due to the tightening of the worldwide market and the extent of the supply reduction, which will increase the marginal cost of nitrogen fertiliser manufacturing.