Soaring Gas Prices Hit European Chemicals and Steel Sectors

---

Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Soaring gas prices in Europe have forced some of the leading fertilizer producers to slash production at a number of key plants.

Norway's Yara International (Oslo, Norway), which is responsible for around one-third of the world's fertilizer production, announced that it is cutting its European production by 40%. In a statement, the company claimed that: "Record high natural gas prices in Europe are impacting ammonia production margins, and as a result Yara is curtailing production at a number of its plants. Including optimization of on-going maintenance, Yara will by next week have curtailed around 40% of its European ammonia production capacity. Yara will continue to monitor the situation, with the objective to keep supplying customers but curtailing production where necessary." The company produces ammonia in Europe at sites in the Netherlands, Germany, Norway, Italy, France, U.K. and Belgium.

The move came just days after leading U.S. supplier CF Industries (Deerfield, Illinois) announced that it was stopping production at its two U.K. plants due to surging gas prices. However, the company subsequently said it would be restarting ammonia production at its complex in Billingham.

CF Industries' move to restart the plant comes after the U.K. government said it would subsidize production to help maintain carbon dioxide production, a byproduct of ammonia production that is heavily used in the Food & Beverage Industry for everything from stunning animals before slaughter to prolonging the shelf life of baked products to carbonating beverages. According to Reuters, in Britain, the largest sources of carbon dioxide include CF Industries' plants in Billingham and Ince in northwest England. The fear is that the region will now see a hike in the cost of foods due to tighter supplies.

Other sectors, like steel production, also are feeling the pinch. U.K. Steel, the country's representative body for steelmakers, complained that power prices are far too high. "These extortionate [power] prices are forcing some U.K. steelmakers to suspend their operations during periods when the cost of energy is quoted in the thousands per megawatt hour; last year, prices were roughly £50 per megawatt hour," explained U.K. Steel director general Gareth Stace. "Even with the global steel market as buoyant as it is, these eye-watering prices are making it impossible to profitably make steel at certain times of the day and night. While prices have risen across Europe, wholesale prices have quadrupled in the UK and merely tripled in Germany, when accounting for carbon costs. This exacerbates the already grossly unequal electricity price disparity between UK steelmakers and our European competitors."

Gas prices have surged in recent weeks to record levels, tripling due to a number of factors including weak gas stocks after last winter's cold snap, poor wind power generation levels in recent months and disruption to the supply of liquefied natural gas (LNG) due to the COVID-19 pandemic. Asia is outbidding Europe for the limited amount of LNG that is not already tied up in fixed contracts. There have been calls by some of Europe's leading lawmakers and nations to investigate whether Russia's state-owned Gazprom (PINK:OGAZPY) (Moscow) has been responsible for the gas-price spike. Europe relies on Russian gas for roughly 40% of its needs. More than 40 members of the European Parliament from all political groups called on the European Commission to launch an investigation into alleged market manipulation. A joint letter read: "We call on the European Commission to urgently open an investigation into possible deliberate market manipulation by Gazprom and potential violation of EU competition rules."

Gazprom has denied any wrongdoing. It stated: "Gazprom delivers gas under consumer requests fully in line with contractual obligations and aims to meet requests for extra deliveries whenever possible."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.