European nitrogen fertilizer and synthetic ammonia industry continues to be under pressure

　　The European nitrogen fertilizer and ammonia industries continue to be under pressure from high natural gas prices amid ongoing geopolitical conflicts
.
Recently, several media reported that CF Fertilizer Company, a wholly-owned subsidiary of CF Industries, the world's largest ammonia producer, said that nitrogen fertilizer producers in the United Kingdom and other parts of Europe are expected to continue to squeeze ammonia and fertilizer production profits due to the continued high prices of European natural gas.
Will still face severe market conditions
.
The company has closed its ammonia and fertilizer plants in Ince, England, leaving only the Billingham plant
.
In the long run, although European natural gas and fertilizer prices have shown signs of falling, their high prices will continue, and the European nitrogen fertilizer and synthetic ammonia industries will continue to be under pressure
.

　　CF industrial shutdown arouses concern

　　Is natural gas the main raw material and main fuel source used in the production of synthetic ammonia? The cost of nitrogen fertilizer production largely depends on the price of natural gas
.
As the basic component of nitrogen fertilizer, synthetic ammonia consumption accounts for more than 80% of the global ammonia market, while nitrogen fertilizer accounts for about 60% of all fertilizers, of which synthetic ammonia is processed into products such as urea, ammonium nitrate, ammonium sulfate, ammonium phosphate and nitrogen solution
.
CF Fertilizers said that for many producers around the world, including the company, more than 70% of the total cost of producing ammonia is natural gas
.
In a recent announcement about the proposed permanent closure of one of its two integrated ammonia and nitrogen fertilizer plants in Ince, the company said: "The gas forward curve suggests that nitrogen facilities in the UK and Europe will become A global high-cost marginal producer, posing an ongoing challenge to the sustainability of current operations
.
”

　　CF Fertilizers said it plans to restructure its UK fertilizer business
.
All of Ince's production operations will be concentrated at the larger Billingham plant, which includes synthetic ammonia, ammonium nitrate and carbon dioxide
.
CF Fertilizers said that the Billingham Fertilizer Complex has enough capacity to meet the expected demand for ammonium nitrate in the UK.
The company also has a large number of industrial contracts for synthetic ammonia and nitric acid, and can pass on the cost of natural gas to customers.
Its production cost per ton is higher than due to factors.
Sri Lanka factory is lower
.
In addition, the Billingham plant has more operational flexibility as it features a 40,000-ton ammonia storage tank that can be used to import lower-cost synthetic ammonia
.

　　According to the data of CF Fertilizer Company, Billingham's total ammonia production capacity is 595,000 tons/year, ammonium nitrate production capacity is 625,000 tons/year, and nitric acid production capacity is 410,000 tons/year
.
The closed Ince plant has a synthetic ammonia production capacity of 380,000 tons per year, which has been shut down since September last year
.
It also has an ammonium nitrate production capacity of 575,000 tons/year and NPK compound fertilizer production capacity of 415,000 tons/year
.
Global supply chain issues and soaring demand and costs for certain raw materials so far this year, CF Fertilizers said, NPK sales are expected to decline significantly for the foreseeable future
.

　　The impact of high gas prices will continue

　　Market participants said that at present, the high cost of nitrogen fertilizer and synthetic ammonia caused by high gas prices and geopolitical conflicts will continue for some time
.

　　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
.
Since the second half of 2021, two companies have slashed ammonia production as record increases in natural gas prices severely impact ammonia margins
.
This situation is exacerbated by the outbreak of the Russian-Ukrainian conflict in 2022
.
In March, Yara cut production at several of its ammonia and urea facilities, and then profit margins improved and those plants began to resume production
.
Yara said in its first-quarter results announcement that the company's weighted average cost of natural gas in Europe was $30.
5/MMBtu, compared with $6.
9/MMBtu in the prior-year period
.
As the geopolitical conflict continues to develop, the supply of nitrogen fertilizer in Russia is dwindling, and the global supply of nitrogen fertilizer is even tighter
.
Yara said the global nitrogen fertilizer market is expected to remain tight in 2022 despite growing global capacity
.

　　The ammonia market is also expected to tighten further as European buyers look to buy all remaining supply east of Suez, according to a recent report from Fertecon, part of S&P Global Agribusiness
.
With ammonia supplies from Black Sea ports unable to recover quickly, end-users contracting with Russia will be keeping an eye on increased production in Saudi Arabia in the second half of 2022, with Saudi Arabia's Ma'aden scheduled to commission in the third quarter of this year, the report said.
Its 1-million-tonne-a-year ammonia plant in Saudi Arabia
.

　　Fertecon's latest market briefing states that fertilizer prices have been falling in recent weeks
.
However, today's tight supply situation in the fertilizer market remains unchanged as sanctions and trade tariffs have led to lower supply in several markets, including Russia
.
According to Fertecon historical data, between May 2020 and May 2022, the prices of urea, diammonium phosphate and potash fertilizers more than tripled, and the prices accelerated in the first quarter of this year, then stabilized and began to decline in April
.
Recently, the Dutch TTF natural gas price has averaged $27/MMBtu, which translates to less than $950 per ton of ammonia produced theoretically, which has improved from earlier
.
However, Fertecon said that while European gas prices have softened in recent weeks, overall prices remain at "high levels", which could still increase production costs for ammonia and all nitrogen products
.