Yara International ASA, Oslo, said on Dec. 15 that including planned maintenance and unscheduled outages, its European ammonia production was approximately 30 percent (around 370,000 mt ) below capacity from September to November. The company in early December told Green Markets most of its idled ammonia production was back up or was in the process of returning to production (GM Dec. 3, p. 1).
Record high natural gas prices led Yara to curtail ammonia production at a number of its plants in Europe in September (GM Sep. 17, p. 1). At the time, Yara estimated that some 40 percent of its ammonia production capacity was coming offline.
CF Industries Holding Inc. Deerfield, Ill., the same week also announced that soaring gas prices in Europe had caused the company to idle plants in the U.K. Other European producers, including Vienna-based Borealis Group AG, and BASF subsequently announced European ammonia curtailments (GM Sept. 24, p. 1; Oct. 1, p. 1).
In its Dec. 15 statement, Yara confirmed that most of its ammonia production in Europe is back on stream. The company also confirmed that the impact on finished fertilizer production has been limited, as unprofitable ammonia production has been replaced with sourcing from Yara plants outside Europe, and from the company’s global ammonia trade and shipping network.
Yara said it will continue to monitor the situation with the objective to keep supplying customers, but curtailing production where necessary.
Even so, European natural gas prices were gaining again this week, following news that Germany’s regulator Bundesnetzagentur would not be making a decision on the start-up of Russia’s Nord Stream 2 gas pipeline – a twin gas link across the Baltic Sea – before July, Bloomberg reported.
“European natural gas prices are rising on the heels of a forecast for a cold snap next week, comments from the German regulator indicating no decision on the Nord Stream 2 pipeline until at least next July, and Europe’s gas inventories dropping fast,” said Green Markets Research Director Alexis Maxwell.
“European ammonia production margins turned negative as gas prices rose in December after a brief reprise in November, signalling further risk ahead for continued shutdowns through spring,” she said.
The benchmark Dutch TFI front-month gas contract (currently January 2022) in Amsterdam gained as much as 2.1 percent to €135 per megawatt-hour at midday on Dec. 16 on news of the further Nord Stream 2 approval delay. By close, it had reached €136.55 per megawatt-hour, up from €100 per megawatt-hour in mid-November.
Nord Stream 2’s start-up delay means the link will not be moving gas when injections start to refill Europe’s depleted storage sites after winter. That risks extending the current market tightness into next winter, according to the Bloomberg report.
An initial decision by the German regulator had been expected by Jan. 8 (GM Oct. 29, p. 1). But Bundesnetzagentur suspended the certification process for Nord Stream 2 on Nov. 16, according to a bne IntelliNews report, citing a tweet by Bundesnetzagentur (GM Nov. 19, p. 1). The regulator decided to suspend the process until the Nord Stream 2 AG’s holding company had reorganized its legal structure to conform with German law. This will involve the transfer of the assets and people to a subsidiary.
The German regulator’s decision is only a provisional one, after which it is passed to the European Commission for comment, which will take a further two-to-four months. Then, Bundesnetzagentur has a further two months to make a final decision.
The future of Nord Stream 2 could also be at risk due to the escalating tensions over Russia and Ukraine.
Gas inventories in Europe are less than two-thirds full and weather forecasts point to lower-than-average temperatures for the next four weeks, according to the Bloomberg report. Meanwhile, prolonged nuclear reactor halts in France, a major electricity exporter, will further boost Europe’s demand for alternative power-generation fuels such as gas.