Natural gas prices have risen 1100% in a year!

Norwegian fertilizer giant Yara announced on March 9 that it will temporarily cut output at two of its European plants as European natural gas prices hit record highs
.

The two plants have a combined annual production capacity of 1 million tons of synthetic ammonia and 900,000 tons of urea, namely the Ferrara plant in Italy and the Le Havre plant in France
.

"Including optimization and maintenance of other production facilities, Yara's ammonia and urea production in Europe is expected to be operating at approximately 45% capacity by the end of this week," the company said in a statement
.

On March 8, TTF benchmark Dutch natural gas futures traded at $67.
925/MMBtu (million British thermal units) one month ahead, up from $5.
622/MMBtu a year ago and up more than 1,100% in a year
.

Natural gas is the main feedstock for ammonia production in Europe
.
At current natural gas prices, the production cost of ammonia is estimated at $2,474/t
.
According to Platts, on March 8, the CFR Northwest Europe ammonia assessment price was US$1,400/ton.

However, analysts said Europe could still import fertilizers from other regions with lower gas prices, but any production cuts could negatively impact global supplies
.

Yara said it will continue to monitor the situation and use its global production system as much as possible to maintain supply to customers and ensure continuity of the food supply chain, but will reduce production if necessary due to challenging market conditions
.

Yara announced ammonia cuts in Europe in September last year as gas prices rose, but later said production had largely resumed
.
At the time, fertilizer giants such as CF Industries, Yara, Borealis and OCI Holland, as well as some nitrogen fertilizer producers, were cutting production amid negative margin growth in the fertilizer industry due to soaring natural gas prices
.

Natural gas is an important raw material for the production of nitrogen fertilizers, and accounts for the bulk of the production cost of synthetic ammonia
.
With natural gas prices jumping to record levels, more European fertilizer producers are expected to be forced to cut output
.