Rising gas prices may surge European fertilizer prices

Fertilizer markets in Europe face a potential price surge due to increasing natural gas costs and a reduction in fertilizer manufacturers’ production. This situation echoes the challenges faced in 2022, with a critical difference: currently, farmers are purchasing significantly fewer fertilizers.

The nitrogen fertilizer market remains tense, especially as natural gas prices continue to rise, recently reaching an annual peak of 49 euros per MWh. The cost of gas substantially impacts nitrogen production, making it more expensive. Since natural gas accounts for approximately 60-80% of the production costs of nitrogen fertilizers, fluctuations in gas prices play a pivotal role in the pricing and supply of fertilizers in Europe and in the overall European agrochemicals market situation.

LAT Nitrogen, a major manufacturer, has announced the closure of one of its plants in Austria due to high gas costs and insufficient demand. Officially, the plant was temporarily halted for several weeks for “maintenance purposes,” a decision heavily influenced by gas prices. If LAT Nitrogen permanently closes the plant, supply levels in the European market could be further reduced.

Moreover, the import of urea and other nitrogen fertilizers into Europe is currently hindered by a weak euro, making imports priced in dollars significantly more expensive. Although global urea prices have recently declined, fertilizer trading remains limited in Germany and Europe due to rising production costs in the fertilizer industry and falling grain prices for farmers.