Ammonia producer Yara cuts production on high gas prices

Author: Tom Manser Richard Ewing

2021/09/17

LONDON (ICIS)--Norwegian fertilizer manufacturer Yara on Friday said it was curtailing European ammonia production due to the record rise in natural gas prices.

The Norwegian major said by the week starting 20 September around 40% of its European ammonia production capacity will be offline, through a combination of capacity cuts and scheduled maintenance.

The company will continue to monitor the situation, with the objective to keep supplying customers but curtailing production where necessary.

ICIS understands more ammonia production may also be brought offline by other companies in the coming weeks, especially at less efficient plants.

Yara has seven ammonia plants across Europe which together can produce 4.9m tonnes of ammonia annually, according to Yara data from 2020.

Assuming around 33MMBtu is needed to produce one tonne of ammonia, this would indicate Yara’s European operations consume around 4.4 billion cubic metres (bcm)/year of gas.

According to the International Fertilizer Association in 2019, the EU along with the UK, Norway and Ukraine produced around 18.7m tonnes of ammonia.

Using a 33-37MMBtu range of ratios, ICIS estimates total European gas demand for ammonia production could be as much as 17bcm/year.

The recent unprecedented rally in wholesale gas prices in Europe has also led to confirmed gas demand response at the two UK fertilizer plants run by US CF Industries.

Similar reductions in output have also been seen at other major producers in western Europe, including OCI plants in the Netherlands, with many of the older and less efficient plants in Ukraine expected to fall offline in the next few days.

In Lithuania, the Achema ammonia plant is currently running at half capacity due to annual maintenance scheduled to finish at the end of the month.