The high gas prices mean that the production of fertilizers in Europe is practically no longer competitive. If politicians don’t intervene, there is a risk of bankruptcies and, of all things, dependence on Russia and the Gulf States for food production.
During the corona pandemic, Germany felt what it means to be dependent on other countries. Among other things, we had too few protective masks and had to beg, especially in Asia, which usually has political implications.
It is similar with the energy transition, where the German solar manufacturers have practically all disappeared and there is now also a dependency on manufacturers from other nations. This is particularly tricky when resources are involved. Being so dependent makes you open to foreign policy blackmail and forces you to make compromises that sometimes don’t match your own values.
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Now Germany and Europe are threatened with another major dependency and that in the extremely sensitive area of food: the local fertilizer manufacturers are getting into financial difficulties. Production is no longer competitive at current gas prices.
The companies pay about six times more for natural gas than their competitors who produce in other regions of the world. As a result, the prices for fertilizers are significantly more expensive and hardly competitive on the world market.
70,000 jobs depend directly and indirectly on fertilizer production in Europe. At least 70 percent of fertilizer production capacity in Europe has already been shut down. This is confirmed by figures from the Fertilizers Europe industry association and the market researcher ICIS. Production is no longer economical.
Industry associations and company representatives are already calling for state aid. At the largest German ammonia manufacturer SKW Piesteritz, the works are completely idle. Whether and when production can resume here is not foreseeable. The 860 employees of the Wittenberg company will be preparing for short-time work from October. According to SKW, the planned gas levy would cost an additional 30 million euros per month.
The fear is that fertilizer production will soon no longer take place in Europe and the continent will be dependent on imports from other countries. The issue is particularly sensitive because major export nations are not flawless democrats.
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No wonder, since the production of fertilizers is mainly worthwhile where gas is cheap: in the Gulf States and in Russia. Many new facilities are currently being built, especially in the Persian Gulf. These include the Saudi Arabian mining group Maaden, the state-owned energy company QC from the Sultanate of Oman and the Qatar Fertiliser Company, a subsidiary of the state-owned company Qatar Energy.
They are all starting new production facilities or have announced that they will. And Russia is already the world’s largest producer and exporter of fertilizer and ammonia.
Putin would probably benefit the most from a bankruptcy of the European competition. The Russians are looking for new uses for the gas they are no longer supplying to Europe. The point: Moscow could also sell ammonia to Europe because the substance is not on the sanctions lists.
Europe’s farmers need nitrogen fertilizers and have little desire to be dependent on Russia. The governments of the affected countries and the European Union must now ask themselves whether direct help from European manufacturers is not cheaper in the end than being dependent on these other countries in a few years. There is currently an increasing shortage of food in the world anyway, which climate change is likely to exacerbate.