BASF to Cut European Ammonia Production

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--German-based chemical major BASF SE (Ludwigshafen, Germany) is planning to cut ammonia production in Europe due to rising natural gas prices.

Ammonia is a basic building block for ammonium nitrate fertilizer, which releases nitrogen, an essential nutrient for growing plants, including farm crops and lawns. About 90% of ammonia produced worldwide is used in fertilizer to help sustain food production. BASF is just one of a growing number of ammonia producers that have been forced to curtail European production due to rapidly rising gas prices related to Russia's cutting gas supplies to Europe. Others warning of ammonia reductions include INEOS Group AG (London, England) and Germany's largest ammonia producer SKW Piesteritz, Reuters reported.

"We are reducing production at facilities that require large volumes of natural gas, such as ammonia plants," said Dr. Martin Brudermüller, chairman of the board of executive directors of BASF SE, in a conference call at the recent release of its quarterly results. "This is standard practice in the industry when margins are economically viable. Around 25% of the natural gas required as feedstock (at Ludwigshafen) is used to produce ammonia. External sourcing of ammonia is possible...this is an important part of our risk mitigation considerations in the event of a major curtailment of natural gas volumes."

BASF's Ludwigshafen Verbund site is the world's largest integrated chemical complex. Employing 39,000 people, it comprises a network of around 200 production plants that are connected to each other by over 2,850 kilometers of pipelines and more than 230 kilometers of rail track. The site produces roughly 8,000 sales products. Germany has been among the hardest hit by Russia's reduction in gas supplies to the European Union (EU).

BASF confirmed that power and steam production at Ludwigshafen, which requires 37 terawatt-hours (TWh) per year--can be partially switched to fuel oil, covering around 15% of the gas. Gas supplies cost the company over 800 million euro (US$819 million) more in Q2 2022 compared with the same period last year, and more than 1 billion euro (US$1.02 billion) more than in 2020.

BASF stated: "Current developments, mainly driven by the war in Ukraine and its impact on energy and raw materials prices and the availability of raw materials, especially in Europe, may lead to additional headwinds. In particular, risks could arise from production stoppages at major European sites as a result of further restrictions to European gas supplies from Russia. In this case, the loss of European capacities could be partially compensated for by higher plant capacity utilization at sites outside of Europe."

In June, Industrial Info reported that the U.K.'s only fertilizer manufacturer, CF Fertilisers UK (Ince, Cheshire) was shutting one of its two plants as part of a company-wide restructure. The closure of its Ince site leaves its Billingham plant as the largest ammonia, ammonium nitrate (AN) and carbon dioxide (CO2) production facility in the country. CF blamed rising gas prices for its decision. The Ince and Billingham plants were temporarily shut last September due to rocketing gas prices. For additional information, see June 29, 2022, article--CF Fertilisers Shuts One of Two U.K. Plants.

Last month, Industrial Info reported that Germany's chemical producers are set to begin construction on more than 80 capital-spending projects in 2023, worth about US$1.7 billion. The investment includes unit additions, capacity expansions and grassroot and modernization projects, among others. Subscribers to Industrial Info's Global Market Intelligence (GMI) Chemical Processing Project Database can click here for a list of detailed project reports. For additional information, see July 19, 2022, article--German Chemical Producers Plan $1 Billion in 2023 Capital Kickoffs.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).