AGF Nitrogen may curtail ammonia capacity due to high natgas prices, warns European food security at risk

Soaring natgas prices are “a serious threat to European food security” the head of the continent’s second-largest producer of fertilizers and nitrogen-based products, AGF Nitrogen, has warned, adding his group is mulling curtailments at its ammonia plants.

CEO Petr Cingr blamed the potential cuts to the group's 3.6m. tonne/year ammonia capacity on the “rising cost of natural gas and persistently high prices of emissions allowances”, with farmers “already reducing demand for fertilizers for the upcoming season”.

The company did not disclose which of its sites could introduce the curtailments. AGF Nitrogen group connects nine production and trading firms in half a dozen European countries, including in France, Austria, Germany and the Netherlands.

“Ammonia production and pricing are fundamentally determined by the cost of natural gas, energy, and, consequently, emissions allowances,” the senior executive said in a strongly worded statement.

“As natural gas prices continue to rise and emissions allowance prices remain several times higher than in the rest of the world, ammonia and the fertilizers produced from it are reaching again a price level that is becoming unaffordable for European farmers.

"As a result, farmers are already reducing demand for fertilizers for the upcoming season. Yet without fertilizers, it is impossible to secure sufficient crop yields, and we view the current situation as a serious threat to European food security."

Feedstock prices continue to soar on geopolitical concerns

Cingr's comments came as Dutch TTF prices today climbed to their highest level in more than five years to touch €73.15/MWH, up from €72.21/MWH yesterday after ending last week at just under €67/MWH.

Basis $24.50/MMBTu, Profercy calculates ammonia production costs for an efficient plant of just under $900pt ex-works, prior to emissions costs, with urea manufacturing costs for an efficient unit seen at around $650pt ex-works, again prior to any emissions charges.

In comparison, offshore ammonia prices into Northwest Europe on a duty free/paid basis are around $300pt lower (excluding CBAM costs), albeit imminent capacity curtailments in Europe are expected to reverse recent downward price movement generated by robust international supply.

Other major manufacturers with European ammonia operations have yet to comment on the impact of feedstock price pressures, but leading ammonia traders report an uptick in enquiries for spot cargoes for late Q3 and/or Q4 delivery.

AGF Nitrogen was created by Czech parent Agrofert Group two months ago and its portfolio comprises Lovochemie, Duslo, SKW Piesteritz, LAT Nitrogen, GreenChem, AGF Ammonia Holding, and VUCHT.

At the time of its launch, Cingr expressed the view that “the European production of fertilizers and other nitrogen products, like almost the entire chemical industry, is in crisis”.

“However, any crisis also represents an opportunity for future growth for us, and at Agrofert we have proven many times that we can grasp these opportunities correctly,” he stated.

“With the acquisitions of the companies of the LAT Nitrogen Group and recently OCI Ammonia holding, the Agrofert Group has made it clear that it believes in the future of the chemical industry in Europe," he added on 1 July.