under threat From high gas prices
Exceptionally high gas prices and temporary closures of the industry
The exceptional and unprecedented high EU gas prices have severely impacted the operations of the EU fertilizer industry. There is a real risk this will lead to permanent closures or relocation of our sector outside Europe, if this situation is not addressed in the short term.
For the EU nitrogen fertilizer industry, natural gas accounts for up to 80% of its production costs.
The average September TTF price is US$23/mmBtu, 580 % the level of September 2020.
Source: World Bank
A distorted gas market is a threat to EU jobs and economy
Today’s temporary closures can be tomorrow’s permanent and irreversible closures and the loss of 80.000 jobs in EU. The EU industry has so far successfully managed to find ways and means of mitigating against the artificially low state fixed gas / fertilizer economies prevalent in Russia, North Africa and the Gulf Co-operation Council (GCC).
Gas crisis today, agri-food crisis tomorrow
The production shortages in turn will lead to lower European fertilizer production which could affect next year’s agricultural yield. The industry is the basis for sustainable food supply in Europe. Also many important downstream value chains will be impacted, like CO2 production for the food chain, ammonia water and AdBlue for trucks and other vehicles just to mention the most obvious.
Act to maintain
The EU fertilizer industry seeks urgent corrective actions by the European Commission and Member States.
EU commercial diplomatic pressures on the major gas suppliers to Europe
to supply in an unconstrained manner; real engagement and real hard questions do need to be posed at the highest levels.
Serious consideration for making emergency ‘kick-start’ state aid permissible
It was widely reported last week that the UK government has supplied such state aid to the UK producer, CF Industries UK. Similar interventions may be needed in EU member states, both to supply the market and ensure level playing field with the UK.
Monitoring of the economic situation for farmers
and if necessary, finding instruments for them to deal with volatile market environment.
Include fertilizer industry among sectors entitled to indirect CO2 cost state-aid compensation
The extreme price of gas not only affects the fertilizer sector directly as raw material. Natural gas has also drastically affected the electricity prices which have a significant impact of certain fertilizer production processes. The option to compensate with state aid should be granted.
Continue to support the existing EU anti-dumping measures
on ammonium nitrate and urea ammonium nitrate as guardians against proven unfair competition on gas and/or non-existent charges on carbon emissions performance. The concerned industries, more than any other period beforehand, are vulnerable to ‘structural’ and predatory injurious dumping. The EU must remain steadfast here. In any case, in the present circumstances anti-dumping duties are not a real barrier for imports.
Our prime goal is to return to ‘normalised’ commercial conditions whereby EU fertilizer industry can continue to supply European farmers with high quality and climate friendly EU-made fertilizers.