Hungary’s only nitrogen fertilizer
maker, Nitrogenmuvek Zrt, resumed full production last month as natural gas
prices eased, but warned that potential disruptions next year could threaten
crop yields. The company was one of the first European producers to come back
online after the plant was idled in August as Russia squeezed gas flows and
prices spiked. An estimated 70% of Europe’s ammonia capacity was offline in
September.
While gas prices have dropped to
less than half their August peak, 2023 will be the first full year with little,
if any, Russian gas coming to Europe, Nitrogenmuvek Chief Strategy Officer
Zoltan Bige told Bloomberg in an interview. And gas prices have been
going up in recent weeks.
The plant, which mainly produces
calcium ammonium nitrate from local dolomite, has already been idled for 210
days this year. Bige forecasts higher EBITDA in 2022 than in normal years
despite the plant closures, but said, “that doesn’t mean that we’re in a
comfortable position, and it’s unsustainable.
“I am not sure if we can avoid
shutdowns in the first quarter as risks are still existing,” Bige said. “Market
activity is starting to pick up, but it’s still not in line with normal
conditions.”
Ammonium nitrate prices reached
record levels earlier this year as European plants were idled and Russian
exporters struggled with logistical challenges following the invasion of
Ukraine. Moscow is trying to reopen an ammonia export pipeline that runs from
Togliatti to the port of Odesa in Ukraine, but some buyers are shunning Russian
supplies regardless of availability, according to Bige.
“Having access to any additional
ammonia can be helpful,” Bige said. Still, “receiving gas is more crucial than
having this ammonia, because we do have our ammonia capacities in Europe.”
About 30% of NPK fertilizer is
missing from the European market as shipments from Russia have been disrupted,
Bige said.
Lower fertilizer application
threatens to curb European crop yields and inflate food prices, according to Adrien
Tamagno, an analyst at Berenberg.
The nitrogen fertilizer deficit cannot
be plugged by imports of urea, and logistics challenges in the first quarter
are likely to underline the importance of local plants for European farmers,
Bige said.
“There’s still a good chance to
deliver good volume of yields this coming season if the right form of nitrogen
is applied in right time and amount,” he said. “It will be crucial in the spring
to have the product delivered on time.”
