The crop nutrition industry warned that a flood of cheap Russian fertilizer could drive European producers out or off the continent. This would pose a threat to food security on the long term.
After Russia’s invasion of Ukraine at full scale, the flow of Russian gas into Europe slowed down significantly. European countries began to look for alternative sources of supply. Russia continues to export cheap nitrogen-based fertilizers to Europe using its gas.
Imports of some fertilisers, like urea have increased even since Moscow invaded Ukraine in 2022. Cheap fertilisers have helped European farmers but their own fertiliser producers are struggling to compete.
“We’re being inundated with Russian fertilisers that are cheaper than ours. They pay peanuts per tonne of natural gas compared to us European producers,” explained Petr Cingr. He is the chief executive officer of SKW Stickstoffwerke Piesteritz – Germany’s biggest ammonia producer.
He warned that if politicians do not act, Europe’s “production capacity” will “disappear”.
Cingr’s remarks echo those made by Svein Tore Hosether, CEO of Yara International – one of the largest producers of nitrogen-based minerals fertilisers in the world – who statedin March that Europe is “sleepingwalking” towards dependence on Russian fertilizer.
Cingr & Holsether claim that Moscow uses this loophole to fund their war chest.
Tim Benton is a food security expert with Chatham House. He said that European producers have complained for years about the advantages their Russian counterparts enjoy due to cheaper natural gas. He said that their arguments are more persuasive since Russia’s invasion of Ukraine.
Benton stated that the focus of Europe may have to shift away from “market efficiency” to “security of our supply”, as the world becomes more “contested and armed”.
What is the risk for our food security?” Should we pay a premium to insure against risk by encouraging the local industry to [survive] during periods when they are not competitive globally?
He said that it was “not unreasonable” to suggest that UK and European agriculture could suffer if they became dependent on imports from Russia or other “potential enemy”.
Eurostat data show that a third of EU urea imports, the cheapest nitrogen-based fertilizer, comes from Russia. The amount imported in 2023 is close to a record level. Customs data shows that Poland’s imports from Russia of urea rose to $120mn by 2023. This is up from $84mn just a year earlier.
Benjamin Lakatos is the CEO of MET Group. The Swiss-based energy firm announced in June its intention to purchase majority shares in Baltic fertilizer producer Achema.
He said that because 70 to 80 percent of a fertilizer company’s operating costs are derived from natural gas the industry will be more affected by the rising cost of gas and energy than any other sector.
Other major players are also leaving the market. BASF, world’s biggest chemicals group, has reduced its operations in Europe, including fertilisers, over the last few years and focused on new investments in China and the US, where costs are cheaper.
Cingr of SKW said that “sooner or later everyone, including us, would follow.” He said that his company is in negotiations to install an ammonia pipeline in the US where they can “get much cheaper natural gases, electricity, and be subsided by the inflation Reduction Act”.
Cingr said that without production in Europe, Europe will be dependent on imports, mostly from non-democratic nations, like Russia and Belarus. Putin has such control over European food production that “nobody can predict what he will do,” said Cingr.
Chris Lawson, director of fertilisers for consultancy CRU, says that Brussels is unlikely to respond to requests for sanctions against Russian crop nutrients. He said that the policymakers still have a strong memory of high fertilizer prices in 2022, and of threats to food safety.
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