Surging Gas Prices Force Norway’s Yara to Reduce Ammonia Production

Norway’s Yara, one of the world’s largest fertilizer producers, is set to cut ammonia production due to soaring gas prices. The move could result in a fertilizer shortage for Europe’s crops. Ammonia is a key input in producing fertilizers. Without its usage, crop yields will deteriorate, as nutrients removed from soil during harvesting are not replenished. Yara has been warning the world faces an extreme food shortage due to high gas prices, Russia’s invasion of Ukraine and sanctions on Russian fertilizer producers.

Fertilizer production is one of the most energy intense industries in the world. Manufacturers, such as Yara, require gas for the process. Gas prices have surged almost 50% in August and nearly 300% this year.

Lower fertilizer output would lead to lower crop production, which would have a long term implication of higher food prices.

Yara has already begun reducing ammonia production from earlier in the year. It will only be using around 35% of its European ammonia capacity after its latest cuts, the company said on Thursday.

Farmers, in turn, will have to import more fertilizer from outside Europe, but it will be more expensive. Alternatively, European fertilizer could be produced using ammonia imported from elsewhere.

Yara said it would use imported ammonia to meet customer demand.

Yara is just one of several European chemical companies that have curtailed ammonia output. Germany’s SKW Piesteritz and BASF cut some production earlier in the year. But curtailments accelerated this week.

Grupa Azoty, Poland’s biggest chemicals firm, said it will limit fertilizer production because of surging gas prices. CF Fertilizers UK, a subsidiary of CF Industries Holdings, also announced it was halting ammonia production due to high natural gas and carbon prices.

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