Source: vinachem.com.vn
The flow of natural gas imported from Russia into the EU has decreased significantly since the start of the Russia-Ukraine war, forcing European countries to turn to other sources of supply. Meanwhile, Russia continues to use its available natural gas resources to produce and then export cheap nitrogen fertilizers to Europe.
The volume of imports of some types of fertilizers from Russia into the EU, such as urea, has increased sharply after the Russia-Ukraine war in early 2022. Although these cheap fertilizers help European farmers, the Fertilizer producers in the region are struggling to compete in adverse conditions.
CEO of SKW Piesteritz Fertilizer Company, the largest ammonia producer in Germany, said: “The market is currently flooded with fertilizers imported from Russia at significantly cheaper prices than our fertilizers, just for the reason that because they simply have natural gas supplies at much lower prices than our European producers.” He warned that European fertilizer factories will “disappear” if EU governments do not take appropriate actions.
Similarly, the CEO of Yara international Company, one of the world’s largest nitrogen fertilizer producers, said in April 2024 that Europe is gradually shifting to dependence on imported fertilizers from Russia. .
In order to avoid impacts on food security, Western countries have excluded Russia’s food and fertilizer exports from the sanctions being imposed on this country. However, fertilizer companies in Europe believe that Moscow has abused that loophole to exploit more financial resources for its war machine. For many years, European fertilizer producers have complained to the European Commission about the advantages that Russian fertilizer companies enjoy thanks to cheap natural gas. Their arguments have become even stronger since Russia launched a special military campaign in Ukraine.
European fertilizer manufacturers believe that, as disputes and conflicts in the world are increasing, in the European fertilizer sector it is necessary to shift the focus from “market efficiency” to “ensuring safety”. supply security”.
The question is: ”What are the risks to food security? Should the EU subsidize regional fertilizer companies to survive a period when they cannot compete globally? That is not an unreasonable proposal in the context that the British agricultural industry and EU countries may suffer heavy losses if they become dependent on fertilizer imports from Russia or other “hostile countries”.
Currently, 1/3 of the volume of urea imports (the cheapest type of nitrogen fertilizer) into the EU comes from Russia. Eurostat data shows that urea imports in 2023 have reached a near record high. For example, according to customs data, urea imports from Russia to Poland in 2023 have increased to nearly 120 million tons compared to only 84 million tons in 2021.
“Years of crisis are taking place for the European fertilizer industry,” said the CEO of Switzerland’s MET Energy Group. This group plans to acquire fertilizer manufacturer Achema in the Baltic region.
With natural gas accounting for 70-80% of the operating costs of fertilizer manufacturing companies, if natural gas prices increase, the fertilizer industry will be affected much faster than other industries.
Other large companies are leaving the market. BASF Group – the world’s largest chemical group – has been reducing operations in Europe for several years now, including fertilizer production, and is instead focusing on new investment programs in the US and China, where costs are lower.
Director of SKW Piesteritz said that sooner or later other companies will follow BASF. SKW is negotiating the possibility of building an ammonia production line in the US, where natural gas supplies are much cheaper, electricity prices are much lower and fertilizer companies can enjoy subsidies thanks to US Emissions Reduction Act.
Without fertilizer factories, the EU would depend on imports from other countries such as Russia and Belarus. At that time, Russian President Putin will hold leverage with a huge impact on European food production.
However, consulting firm CRU believes that politicians in Brussels will be less likely to respond to calls to impose sanctions on Russian fertilizers. Memories of the record high fertilizer prices of 2022 and the accompanying threat to food security still linger in the minds of many EU policymakers.
