Last Updated on August 3, 2022
The world’s largest chemical company, Germany’s BAS, recently announced its plans to scale down on ammonia production. The price of ammonia — a key ingredient in many fertilizers used worldwide — is tied closely with that of natural gas.
“We are reducing production at facilities that require large volumes of natural gas, such as ammonia plants,” BASF CEO Martin Brudermueller said in a July 27 media call after the company’s second quarter financial report became available.
The company had previously announced a reduction in its ammonia production last year. In September 2021, BASF cut ammonia production at its headquarters in Ludwigshafen, Germany, as well as at its large chemical complex in Antwerp, Belgium, according to The Epoch Times.
In order to fill the gaps, BASF will purchase ammonia from external suppliers, Brudermueller said. The production of ammonia usually accounts for about 4.5 percent of the natural gas used by German industries.
The CEO went on to say that farmers can expect high fertilizer costs to continue well into 2023. “The main application for ammonia is for fertilizers, and that’s for producing food. For this year, that’s not going to be a problem because all the farmers have already bought their fertilizers and have already used it on their field. The harvest is already taking place,” he said. “Next availability will be worse because the capacity is not going to be there and the next is price. Fertilizer prices are skyrocketing.”
“And then farmers will be forced to save money and will only use the minimum of fertilizers on their field. Might also mean that harvest is going to be minor. If there are weather problems, [it would result in] a shortage situation for important crops.”
Ammonia is a key ingredient in fertilizer production. It also plays a key role in the manufacturing of plastics and diesel exhaust fluid.
Germany’s largest ammonia producer, SKW Piesteritz, and No. 4, Ineos, have separately announced that production cuts cannot be ruled out as the price of natural gas remains high across the continent.
Germany has no liquefied natural gas port terminals to replace Russian imports, which it relied heavily on. As a result, German industries are under pressure to reduce gas consumption if supplies are disrupted further.
Russian gas giant Gazprom began reducing its gas supply to Europe via the Nord Stream 1 pipeline, the major delivery route to Europe for Russian gas, on July 27. Supplies were cut to a fifth, or 20 percent, of the pipeline’s total capacity, The Epoch Times reported.
On July 26, European Union responded by announcing a “voluntary reduction” of natural gas demand by 15 percent in order to prepare for the winter.