Germany’s BASF, the world’s largest chemical company, plans to further cut production of ammonia, a key ingredient in fertilizers, amid rising gas prices.
“We are reducing production at facilities that require large amounts of natural gas, such as ammonia plants,” said BASF Chief Executive Officer Martin Brudermueller after the company announced its results for the second quarter of 2022. said in a media call on July 27.
In September 2021, BASF cut ammonia production at its headquarters in Ludwigshafen and at its large chemical complex in Antwerp, Belgium.
To fill the supply gap, BASF will purchase ammonia from an external supplier, Brudermueller said.
Ammonia is an important component of fertilizer production. It also plays an important role in the production of engineering plastics and diesel exhaust fluids. Its production also produces high-purity carbon dioxide as a by-product required by the meat and carbonated beverage industries.
Chemical companies are Germany’s largest users of industrial natural gas, and ammonia is the industry’s most gas-intensive product. Ammonia production typically accounts for about 4.5% of the natural gas used by German industry.
Germany’s largest ammonia producer SKW Piesteritz and fourth-largest Ineos have separately said they cannot rule out production cuts amid disruptions to Russian gas supplies.
Unlike many European countries, Germany does not have a liquefied natural gas port terminal to replace Russian pipeline gas. This means that companies are under pressure to cut back on gas-intensive activities if gas supplies are cut further.
On July 27, Russian gas producer Gazprom began cutting gas supplies to Europe via the Nord Stream 1 pipeline, the main delivery route for Russian gas to Europe. The supply has been reduced to just one-fifth, or 20%, of the total pipeline capacity. The drop comes after Pipeline restarts on July 21, following his scheduled 10-day maintenance outage.
To strengthen the region’s energy security, the European Union announced on July 26th that it will cut demand for natural gas by 15% over the winter.
Brudermueller said by 2023, farmers could see higher fertilizer costs and worsening fertilizer availability.
“The main use of ammonia is fertilizer, which is food production. I am,” he said. “Capacity is not there, next is price, so next availability is worse. Fertilizer prices are skyrocketing.”
“Then farmers are forced to save money and use the least amount of fertilizer in the fields, which also means less yields. [it would result in] Critical crops are in short supply,” he added, noting that poor countries at the far end of the food supply chain will face significant challenges.
Reuters contributed to this report.