Wall Street Developer News Fertilizer producers in the EU began to stop plants because of gas prices

Fertilizer producers in the EU began to stop plants because of gas prices

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The Lithuanian fertilizer plant Achema will suspend its work from September 1 because of a sharp increase in gas prices and production costs. This was announced by the general director of the company, Ramūnas Miliauskas.

The top manager, as quoted by LRT (Lithuanian Radio and Television), said that due to high gas prices, the company’s fertilizers produced are becoming uncompetitive compared to products from Russia and the United States. “In such a market situation, most Western producers are forced to stop their plants, Achema is no exception,” he said.

According to Miliauskas, the company has not been operating at full capacity since the fall of 2021, and now “will only continue to produce technical gases and resins.”

Achema, the largest producer of nitrogen fertilizers in the Baltic states and the largest gas consumer in Lithuania, is part of the Lithuanian holding Achemos grupė. In 2021, Achema’s fertilizer output fell by nearly 10% to 2.2 million tons. The company exported more than 75% of its output, mostly to France, Great Britain, Belgium, Germany, Poland, and Scandinavian countries. Last year the company’s revenues grew by 57% to 590.3 million euros.

Polish Grupa Azoty, the second largest fertilizer producer in the EU after Norway’s Yara, announced on August 22 that it was shutting down its nitrogen fertilizer and other chemical products (polyamide and caprolactam) plant. Grupa Azoty will continue production of catalysts, nitric acid and some other products. A day later, on August 23, the Polish ANWIL (part of the Orlen group) also announced the suspension of its nitrogen fertilizer production. Both companies explained that the gas prices did not allow them to continue producing fertilizers.

In spring 2022 Poland and Lithuania refused to import pipeline gas from Russia and are buying more expensive fuel from the EU and liquefied natural gas.

Spot gas prices in Europe accelerated at the end of July. On August 22, the price of gas for the first time since the beginning of March exceeded $3,000 per 1,000 cubic meters.

The price record was set on March 7, when, after the start of Russia’s SWO in Ukraine, the price of 1,000 cu.m. was approaching $3900. But then the price went down and consolidated above $1,000 per 1,000 cu.m. On August 24, the gas price reached $2,957 per 1,000 cubic meters at some moments, according to data from the ICE exchange.

“Gazprom said Aug. 16 that spot gas prices in Europe could exceed $4,000 per 1,000 cubic meters in winter 2022/23, according to the company’s conservative estimates.

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