21 Oct 2021

During recent weeks, farmers are being hit from all sides with increased production costs, with fertilizers responsible for the most volatility and uncertainty.

Europe has been hit by sky-high gas prices. For the fertilizer industry where natural gas accounts for up to 80% of production costs, the exceptionally high gas prices meant that EU & UK producers were no longer competitive which again led to significant temporary curtailments and plant closures. There is a real risk that this situation, if not addressed in the short-term, will lead to permanent relocation outside Europe.

The EU fertilizer producers operate within a global market. The EU industry has so far successfully managed to compete against the artificially low state fixed gas / fertilizer economies prevalent in Russia, North Africa, and US. However, such is the current enormity of the ‘gas cost gap’ compared to the EU’s market gas prices that European producers are no longer able to compete.

Europe needs a thriving domestic fertilizer industry, supplying Europe’s farmers both in the short and long term. The industry is the basis for sustainable food supply and security in Europe. The current production shortages will lead to lower fertilizer production which, in turn, could affect next year’s agricultural yield and impact crop prices.

The upcoming European Council taking place on 21-22 October where energy prices will be central, is an opportunity to ensure a coordinated approach across the EU bloc to soaring energy prices and agreeing on urgent corrective measures. The European fertilizer industry will no doubt request corrective measures that will allow a return to conditions whereby EU producers can continue supplying European farmers with high quality and sustainable EU-made fertilizers. 

Any potential measures to assist the fertilizer industry or to ease gas prices will be scrutinized.  A story to be followed up as the impact on new crop market prices will not be negligible.

Sébastien Mallet