Rising gas prices challenge EU nitrogen production

Market: Fertilizers
13/10/23

Natural gas prices in Europe have risen by around 40pc over the past week and, once again, pose a challenge to regional nitrogen production.

Spot prices at the TTF hub are up to an eight-month high of €53/MWh today, crushing margins for both agricultural urea and nitrates producers.

Argus estimates that even the most efficient granular urea plants face production costs around €425/t ex-works at a gas cost of €53/MWh, while older units would cost closer to €470/t. One week ago these costs were €100/t less — and production margins were positive. Spot market prices for granular urea in Europe have generally held at around €420-425/t fca seaports in bulk across most northern, Mediterranean and east European markets over the past two weeks.

Prilled urea avoids incurring the additional energy costs of granulation and we estimate that it would cost roughly €360-400/t to produce, while market prices in Benelux were this week at around €415/t fca.

CAN and AN also look only marginally profitable at current market values. CAN prices have fallen by around 10pc over the past two months, with the key German reference now around €310-315/t cif inland — while production costs are estimated at €290-315/t ex-works. Ammonium nitrate producers face a similarly challenging position with production costs estimated at €330-360/t for granulated material.

Previous losses in affordability in 2021 and 2022 prompted sharp increases in nitrogen prices as many factories shut down for extended periods, leading to a massive wave of urea and ammonium sulphate imports to replace the lost production.

But the supply situation is not as dire — the previous periods saw producers facing potential losses of hundreds of euros per tonne of fertilizer — and indeed factories including Romania's Azomures and Croatia's Petrokemija have recently restarted some production. Buyers too have been reluctant to warehouse much price risk ahead of farm demand, which remains seasonally low in Europe, because of losses on similar positions this spring.

Natural gas prices have risen mostly in response to a sharp swing in weather forecasts, alongside heightened energy security concerns and uncertainty over the effect of a new Bulgarian tax on Russian gas transit.

By Bede Heren

France urea market prices vs production costs $/t

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14/11/24

LAT Nitrogen halts sales to Germany on high gas costs

London, 14 November (Argus) — Major European producer LAT Nitrogen has withdrawn from the German market today owing to a surge in gas costs. LAT Nitrogen produces nitrogen-based products for the fertilizer and industrial chemical markets. It sells CAN, ASN and NPK 15-15-15 to the German market. "We will closely monitor the development of gas prices before considering a return to the market," LAT Nitrogen market intelligence and demand planning analyst Harald Lindner said. Front-month natural gas prices on the Dutch TTF have climbed steadily over the past two months, reaching more than €45/MWh today, up by €10/MWh from September. CAN is a key nitrogen fertilizer used in the German market and spot prices have stagnated at about €280/t bulk cif inland and have failed to grow ahead of the season, despite higher list prices. Yara raised its CAN asking price on 16 October to €305/t bulk cif inland for delivery to Germany and the Benelux countries, up from its previous offer of €295/t bulk cif inland. Buying interest from farmers has been incredibly slow ahead of spring applications this year. Market coverage in Germany for nitrogen fertilizers for the 2024-25 fertilizer year is estimated to be 40-45pc, down from an average of 60-65pc by mid-November. Weak grain prices, reduced farm incomes and warehouses full of unsold agricultural produce are also said to be behind the lack of demand for fertilizers from consumers. Some wholesalers are expecting sales to remain slow until the start of 2025, which will give distributors logistical challenges to deliver product ahead of early spring applications. LAT Nitrogen began maintenance in mid-September on some of the lines at its Linz site in Austria, affecting downstream fertilizer output of ammonia, nitric acid, CAN and NPKs. This was due to be finished by early November. The Linz site is a major source of fertilizers for central and eastern Europe, with CAN 27 annual production roughly at or above 600,000t in typical recent years, according to latest IFA data. The 429,000 t/yr prilled urea plant at Linz was unaffected by the maintenance and is running as normal. By Suzie Skipper Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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European urea market braces for CBAM impact in 2026

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14/11/24

European urea market braces for CBAM impact in 2026

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12/11/24

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12/11/24

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Indonesian granular urea discussed up to $350s/t fob

12/11/24

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