Yara President and CEO Svein Tore Holsether this week reiterated that although Yara’s business is flexible and resilient, the impact of the war in Ukraine on global food security will be “dramatic.”
“It’s no longer whether there will be a food crisis, but rather how large it will be,” he told participants at a company earnings call on April 27.
“We repeat our calls for government action to strengthen food supply chains and decrease dependency on Russia,” said Holsether.
Yara’s direct investments in Russia and Ukraine are limited, but the company has previously sourced phosphate, potash, and ammonia from Russia, and purchases significant volumes of natural gas from Russia for its production in Europe.
Yara Executive President and CFO Thor Giæver clarified to the earnings call participants that Yara did not have a general Russia ban in place, but, as previously reported by the company, Yara has stopped all sourcing from suppliers linked to Russian sanctioned entities and persons following the implementation of additional sanctions against Russia implemented on March 9 (GM March 11, p. 30), and said it is utilizing its global sourcing, production, and distribution capabilities with the objective to keep supplying customers and secure continuity in food supply chains.
Holsether said Yara continues to supply fertilizers into Ukraine, albeit “small volumes,” due to logistical challenges.
Responding to an analyst’s question about the company’s raw materials sourcing, Giæver agreed that many supply chains of raw materials were having to be reset in current times.
“There are two effects at the moment. There is both some demand destruction for P and K, and there is also supply disruption for NPK producers, including ourselves,” he said.
But Giæver reminded that Yara has always had a number of other suppliers, “some not as big obviously as the Russian ones,” but he said the net effect of this for the time being is that Yara is able “to manage the totality” and that it can continue to operate. He also noted that Russia is still exporting potash.
“Right now, it is more on the question of demand than the company’s own product availability,” Giæver said.
While reporting that the company’s performance related to safety continues to be “at a low and industry leading level,” Yara acknowledged to earnings call participants “the serious accident” in March at its Ambès plant in southwestern France during the ammonia loading of a truck (GM March 25, p. 28).
The company confirmed the accident caused a leak that “was quickly controlled and did not go beyond the site,” but that a Yara France worker and a contractor were injured and suffered burns. Local media outlets at the time had reported some 14 workers were injured, including two “seriously.”
Ammonium nitrate (AN) is among the products produced at the Yara Ambès site, which has some 0.5 million mt/y of AN capacity.
“This and similar accidents illustrate that we still have more work to do to reach our ambition of zero injuries,” Holsether said.