The sharply rising prices for raw materials are also causing unrest in the fertilizer market.

This is noticeable in the price of ammonia, a chemical product that is used in the manufacture of fertilizer for agriculture.

An important intermediate product for the production of ammonia is natural gas, the price of which rose to a record high due to the high demand after the end of the corona pandemic.

Mark Fehr

Editor in business.

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The European price index for ammonia therefore climbed to a 13-year high of 910 dollars per ton at the end of October and was recently only just below it to 907 dollars (see chart). According to the financial data service Bloomberg, the European ammonia price (Western Europe Ammonia CFR Spot Price) reached its all-time high in September 2008 at $ 930 per ton.

According to the industry association Fertilizers Europe, the price of natural gas accounts for 80 percent of the cost of producing nitrogen fertilizers in the European Union. The association therefore warns that the fertilizer industry is facing not only a temporary, but also a permanent standstill if factories are relocated to locations outside the EU. According to the fertilizer association, production gaps could affect the harvest in the coming year. In addition, the shortage of ammonia affects the supply of the urea solution AdBlue, which trucks, cars and locomotives with diesel engines rely on to reduce their nitrogen oxide emissions. The problem of rising prices for the important ammonia does not only exist in Europe.

The American price indices for ammonia have also climbed. At the end of September, the chemical company BASF announced that it would cut back ammonia production at its Ludwigshafen and Antwerp sites because the conditions for the economic operation of the plants had deteriorated due to the rising prices for natural gas. At the end of October, SKW nitrogen works Piesteritz in Saxony-Anhalt announced that it would reduce ammonia production by a further 30 percent, after having announced a sharp cut back at the beginning of October. According to SKW, the largest German producer of ammonia and urea, fertilizer dealers are currently not ready to pay the prices the company believes are necessary. The price for natural gas has increased more than fivefold.

Ammonia consists of nitrogen and hydrogen, whereby the hydrogen required for production is mainly obtained from natural gas, which has become more expensive. At the beginning of the 20th century, the German chemists Fritz Haber and Carl Bosch developed a process that is still used today to enable the mass production of ammonia. For this invention, they were honored with the Nobel Prize in Chemistry. Artificial fertilizers make it possible to feed a world population that has grown explosively, because it ensures the quantity and quality of agricultural production of food.

Should the rise in the price of ammonia lead to nitrogen fertilizers becoming significantly more expensive, this could increase the price of agricultural products and food.

As a result, there is growing concern that inflation, i.e. the rise in consumer prices, may solidify.

However, suppliers and manufacturers can use hedging transactions to protect themselves against sharp fluctuations in the price of raw materials and agricultural products.

In addition to nitrogen fertilizers, there are alternative types of fertilizers, some of which are produced using other raw materials.

That, too, could at least dampen price increases.