MADRID (ICIS)--Fertilizers production has become so uneconomical in Europe that current curtailed production could be permanently shut if the EU does not take swift action to halt the natural gas price rises, trade group Fertilizers Europe said this week.
The EU this week decided to pass on to the 27 national governments the decision on whether action should be taken on the matter.
A combination of short supply and high demand has pushed natural gas prices to record highs; the fossil fuel is a key feedstock for the production of many fertilizers.
Several European producers have announced production curtailments due to high prices. Fertilizers Europe said natural gas traditionally accounts for up to 80% of production costs.
“If this situation is not addressed urgently, there is a real risk that temporary closures will lead to permanent closures or relocation of our sector outside Europe,” said Jacob Hansen, director general at Fertilizers Europe.
The trade group added that unless the EU and member states implement regulations to halt the increases in natural gas costs, the spikes would filter down to the food industry.
“But fertilizer industry is not just about food for plants. Our industry is also a key supplier of AdBlue for heavy weight vehicles, CO2 [carbon dioxide] supply for meat and beverage industries to name the few,” said Hansen.
This week’s decision by the EU executive body, the European Commission, left the industry cold because it is only a “compendium” of existing regulations which, evidently, have not been able to address the problem, said the trade group.
“While a step in a right direction, [the Commission’s toolbox] falls short of providing immediate measures to significantly reduce the impact on industry and citizens ... What the European industry needs is rapid and targeted measures minimising the effects of this looming crisis,” said Hansen.
The EU should consider emergency state aid for the industry, said the trade group, although the EU rules on competition forbid states to intervene with subsidies in most economic sectors.
It should also put “commercial diplomatic pressure” on the major gas suppliers to Europe - mainly Russia, from where supply has shortened in past months - as well as considering direct support for EU farmers.
Fertilizers Europe added that the current crisis and its potential long-lasting scars could jeopardise the industry’s transition into greener production methods in line with the EU’s Green Deal.
“The transition from natural gas to renewable production bears very considerable investments. The current situation puts in jeopardy industry’s ability to finance these future investments in bringing the necessary climate neutrality in 2050,” said Hansen.