BASF, the world’s largest chemical company, has announced cuts to ammonia production that are likely to put pressure on supplies of fertiliser and CO2.
BASF, headquartered in Germany, said a quarter of its natural gas use went into ammonia production and falling supplies from Russia had prompted the decision.
Ammonia is used mainly in the production of fertiliser, the company said. If ammonia production is curbed, pressure will be immediately felt by agriculture, leading to “declining yields in food production”.
A spokesperson for BASF told Supply Management: “[A cut in ammonia production] would put additional pressure on an already extremely tight market. Russia is a major exporter of ammonia and fertilisers. Exports from Russia are currently in sharp decline. A reduction in gas supplies in Germany would further exacerbate the shortage of fertilisers worldwide, reduce food production and lead to further price increases for basic foodstuffs.”
In the UK, the announcement last month of the closure of a CF Industries fertiliser plant – one of just two such plants in the country – sparked concerns in the food industry. The company is responsible for 60% of UK CO2.
Ammonia is also used in the manufacture of plastics, explosives, textiles, pesticides, dyes and other chemicals. As a byproduct, ammonia production creates high-purity CO2, used in the meat and carbonated beverage industries.
BASF said in an earnings call that natural gas is supplied to all of BASF’s European sites on an as-needed basis. The company said it would purchase some ammonia from external suppliers to fill gaps but warned farmers would face soaring fertiliser costs next year.
“We expect that gas prices will increase significantly because utilities are increasingly buying gas,” the spokesperson added. “BASF is monitoring the situation and will decide accordingly which adjustments may have to be made in the production value chains.”
BASF is the largest chemical company in the world by revenue, according to Statista.
Supplies of natural gas tightened this week as Gazprom, Russia’s state-owned energy corporation, announced a reduction in supplies to Europe through Nord Stream 1 to 33m cubic metres per day, around 20% of the pipeline’s total capacity. It cited concerns over the “technical condition” of turbine engines.
BASF’s quarterly report stated profits before tax of €2.3bn, an increase of 6.2% year-on-year. The report said: “Current developments, mainly driven by the war in Ukraine and its impact on energy and raw materials prices and the availability of raw materials, especially in Europe, may lead to additional headwinds... In particular, risks could arise from production stoppages at major European sites as a result of further restrictions to European gas supplies from Russia.”