The European fertilizer industry is in a severe crisis due to record-high natural gas prices. Gas accounts for 90% of the variable production costs, making it impossible for European manufacturers to continue producing and competing.
European fertilizer producers have called on the European Union for an urgent correction of the current gas policy to overcome this very serious crisis. They have already scaled back 70 percent of their production. The cause is the dramatic increase in gas prices in Europe. According to them, the fertilizer market is collapsing.
Gas prices have risen by more than 1000% compared to a year ago. “The European fertilizer industry is in a complete crisis because the European gas market is broken,” says Jacob Hansen, General Manager at Fertilizers Europe.
The Energy Ministers of the 27 EU countries will discuss a revision of European energy policy next Thursday. Possibly, starting next year, there will be a decoupling between electricity tariffs and gas prices. Due to the current linkage, electricity bills do not rise as extremely as gas prices, while production costs for electricity from solar panels and wind turbines barely increase.
The EU ministers will also consider a proposal for a maximum price for a cubic meter of gas, but there is not yet consensus on this. Several EU countries have already initiated their own 'compensation' measures for citizens and businesses, but a joint European approach is preferred, it is said.
Fertilizer producers say that Europe needs its own strong domestic fertilizer industry to continue producing food within EU countries without dependence on Russia. Since natural gas costs in Europe are 8-10% higher than in the United States and other countries with fertilizer industries, European producers cannot compete in the national and global markets.
According to earlier reports, the near halt in fertilizer production does not immediately lead to major problems in agriculture. Not only producers but also agricultural businesses and their purchasing organizations still have sufficient stocks for the coming months. True shortages are only expected in spring 2023.