- Ammonia is a key component of nitrogen fertilizer
- The Yara cut corresponds to 2 mln tonnes of ammonia / year
- The price of European gas has more than tripled this year
- Cost of food production is rising, analyst says
OSLO, Sept. 17 (Reuters) – Norwegian company Yara (YAR.OL) is cutting European ammonia production due to soaring natural gas prices, the fertilizer maker said on Friday, a sign of rising prices. input costs for food production.
The cuts follow similar action by rival CF Industries Holdings (CF.N), which said on Wednesday it was halting operations at two UK factories, citing high raw material costs for natural gas.
“Including the optimization of continuous maintenance, Yara will have reduced by next week about 40% of its ammonia production capacity in Europe,” said the Oslo-based company.
The world’s second-largest producer of ammonia has a European production capacity of 4.9 million tonnes per year, of which around 2 million will be affected, a company spokesperson said.
Europe can still import ammonia for its nitrogen fertilizer plants in other parts of the world, where gas prices may be even lower, but production cuts are still expected to have a ripple effect.
“Higher gas prices mean inflated food prices,” Carnegie analyst Morten Normann said.
Daily gas prices at the Dutch hub TTF, a European benchmark, have more than tripled this year to record highs, pushing up electricity prices as the winter heating season approaches with gas levels in below average storage.
Yara will continue to monitor the situation and aims to continue to supply its customers but reduce production if necessary, he said.
Norwegian oil and gas company Equinor (EQNR.OL) said on Wednesday it expected the fundamentals driving high gas prices in Europe to remain in place during the fall and winter seasons.
“It’s driven by weather anomalies, general commodity price inflation and supply chain bottlenecks…, but mostly prices are driven by the basic fundamentals of tight supply and high demand, ”Equinor CFO Ulrica Fearn told an energy conference in Oslo. Read more
Yara’s share price fell 4.4% to its lowest level in seven months.
Editing by Raissa Kasolowsky, Jason Neely and David Evans
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