Poland’s Anwil defends ferts expansion as Azoty warns of ‘supply glut’

Author: Will Conroy

2019/06/18

VARIOUSLONDON (ICIS)--Polish fertilizers producer Anwil defended on Tuesday its move to expand its nitrogen capacity after fellow state-controlled Grupa Azoty warned that such capacity additions “may lead to a supply glut and a price war” in Poland.

The planned construction of a third fertilizer production line by mid-2022 at an investment cost of zloty (Zl) 1.3bn ($341m) is to increase Anwil’s fertilizer production capacity by around 50%, from 966,000 tonnes/year to 1.46m tonnes/year.

Anwil, a subsidiary of PKN Orlen, said it has a surplus of ammonia running at around 35%, for which “the natural buyers” would manufacturers of fertilizers.

“Thanks to implementing the planned project, Anwil will be able to utilize this volume and place on the market a ready, high-quality product in the form of nitrogen fertilizers, without losing the margin,” said to ICIS Anwil’s director of integrated communication, Olga Wieszczek.

“Developing the competences of Anwil in terms of nitrogen fertilizers produces measurable benefits not only for the entire Orlen Group, but also for the region and for Polish farmers. By expanding the offer of high quality products, we will contribute to ensuring Poland’s food security,” she added.

She went on to say the expansion would contribute to reduce the imports of fertilizers into Poland.

After an approach from ICIS for its standpoint on Anwil’s expansion plan, Azoty said: “Significant capacity additions may lead to a nitrogen fertilizer supply glut and a price war. According to the available data, consumption of nitrogen fertilizers on the home market is not growing and in neighbouring countries, including Germany, it is in decline.”

The nitrogen fertilizer market in the EU and Poland is currently under pressure from imports, said Azoty, with just under 30% of product used in the bloc sourced abroad.

Other factors influencing fertilizer demand need to be considered, added Azoty, such as the EU Nitrates Directive, which during each year prohibits the application of nitrogen fertilizer until 1 March, contributing to reduced use of some nitrogen fertilizers.

“National Emission Ceilings Directive from the European Environment Agency [EEA] on the reduction of national emissions of certain atmospheric pollutants,” said Azoty.

“Reducing annual emissions of nitrogen oxides, sulphur dioxide, particulates, ammonia and non-methane volatile organic compounds to meet the 2020–2030 commitments will contribute to curtailment of certain types of fertilizers, such as urea,” it added.

Azoty, Europe’s second largest fertilizer producer, added that the nitrogen fertilizer market in Poland would further be harmed by the declining area of land under cultivation, with some agricultural land set aside and used for roads infrastructure, industry and construction.

"Despite very optimistic forecasts by Fertilizers Europe (prepared by the Institute of Soil Science and Plant Cultivation based on the sown area), no growth in consumption of NPK [nitrogen phosphorous potassium] and nitrogen fertilizers, particularly nitrate fertilizers, has been recorded in Poland in recent years. The situation is expected to remain unchanged in the next five years,” Azoty said.

The company added that its fertilizer business would in the years ahead place an emphasis on improving product efficiency, rather than on making production capacity additions.

“Some of the planned efforts are to expand the product portfolio without any major capacity additions and to provide fertilizers that meet the needs dictated by the changing climate as well as products designed for specific cultivation methods and compliant with new EU regulations,” the company’s statement added.

Anwil said its expansion would add thick saltpetre, ammonium sulphate nitrate, nitro-chalk with sulphur, and nitro-chalk with magnesium featuring improved granule properties to its fertilizer product portfolio.

It forecast that the project would boost its operating profit by around €57m yearly.

Pictured: Agricultural fields in Poland's West Pomerania province
Source: Hans Blossey/imageBROKER/Shutterstock

($1 = Zl 3.81)