Actually, the EU wants to become more independent, especially from Russia and Russian energy. The renunciation of Russian gas drove up energy prices in Germany in 2022 and thus also made the energy-intensive production of fertilizers so expensive that European producers had to suspend some of them last year. This gap was filled with even more Russian imports, as figures from the Agricultural Industry Association (IVA) now show.
Exports from Russia to the EU increased more than fivefold in the past season compared to the previous year, said Marco Fleischmann from the IVA at the association’s annual press conference. This season, Russia’s share of EU imports is 19 percent. “Ultimately, the imported fertilizers are nothing more than lots of cheap Russian natural gas on the next value chain,” IVA CEO Frank Gemmer told Capital.
Because the energy and above all the gas costs account for up to 90 percent of the production costs of mineral fertilizers. The more expensive energy and gas become, the more expensive fertilizer becomes. Above all, the production of nitrogen fertilizers from ammonia requires an energy source such as natural gas, both as a raw material and as an energy source in the production process. When gas prices in Europe skyrocketed at the beginning of the Ukraine war, this pushed up the prices of many products in the chemical industry, including mineral fertilizers.
Just one month after the start of the Ukraine war, producer prices for fertilizers in Germany were almost 90 percent higher than in the previous year. In September 2022, the peak in the gas price in the EU then led to an increase of almost 150 percent, according to the EU Commission. Almost two-thirds of ammonia production in the EU, Switzerland, Norway and the UK was idle because it just wasn’t worth it.
The consequences were delayed and reduced purchases of fertilizers from farmers. The high prices depressed demand, so that sales of fertilizers plummeted. Sales of nitrogen fertilizers in Germany in the second quarter of 2022 were almost 19 percent lower than in the same period last year.
When gas prices later fell again, the lost production volumes could not be reproduced due to the available capacities. And this situation is unlikely to improve in the future. The German chemical group BASF, for example, announced at the beginning of the year that it would permanently shut down one of its two ammonia plants in Ludwigshafen after it had also reduced its production in 2022 due to the rise in gas prices.
If less fertilizer is produced in the EU, this will again lead to dependencies that should actually be avoided, said EU Agriculture Commissioner Janusz Wojciechowski. Profitable production of fertilizers in the EU is not only “an essential prerequisite for our strategic autonomy”, but also important for Europe’s contribution to global food security, said Wojciechowski at the end of last year.
The IVA already rates the dependency on suppliers from other countries as too great. The EU urgently needs to think about how to prevent its own fertilizer production from being brought to its knees at the same time as Putin’s war chest is filled, says Gemmer.
Even if fertilizer imports don’t really decouple Russia and its energy, importing Russian fertilizers is not illegal. Food and fertilizer are expressly not on the list of EU sanctions that are supposed to weaken the Russian economy since the outbreak of the Ukraine war. According to the European Council’s website, anyone is allowed to trade and buy fertilizers from Russia. This is to ensure food security and affordable food prices. At the end of last year, the EU even unfrozen assets belonging to certain individuals who are important for international trade in agricultural products.
This article first appeared on “Capital”
