BASF prepares additional ammonia manufacturing cuts in fuel provide disaster

A normal view of the German chemical firm BASF Schwarzheide GmbH in Schwarzheide, Germany, December 10, 2019. REUTERS/Annegret Hilse

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  • BASF lowered ammonia manufacturing in September and is now lowering it additional
  • Yara’s ammonia manufacturing throughout Europe is 27% beneath capability
  • SKW and Ineos say they’re monitoring the scenario carefully

FRANKFURT, July 27 (Reuters) – Germany’s BASF (BASFn.DE), the world’s largest chemical firm, is additional slicing ammonia manufacturing resulting from rising pure fuel costs, it stated on Wednesday, with potential ramifications. from agriculture to delicate drinks.

Germany’s greatest ammonia producer SKW Piesteritz and quantity 4 Ineos additionally stated they may not rule out manufacturing cuts because the nation grapples with the disruption of Russian fuel provides.

Ammonia performs a key position within the manufacture of fertilizers, engineering plastics, and diesel exhaust fluid. Its manufacturing additionally produces high-purity carbon dioxide (CO2) as a by-product, which is important for the meat and delicate drink industries.

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“We’re lowering manufacturing at services that require giant volumes of pure fuel, equivalent to ammonia vegetation,” BASF’s chief govt stated at a press convention after the discharge of quarterly outcomes, confirming an earlier report from Reuters.

He added that BASF would purchase some ammonia from outdoors suppliers to fill within the gaps, however warned that farmers would face skyrocketing fertilizer prices subsequent yr.

Manufacturing traces for feedstock synthesis fuel, a mix of carbon monoxide and hydrogen, and fundamental petrochemical acetylene have been additionally candidates for cuts to save lots of fuel, the chief govt stated.

Not like many European nations, Germany doesn’t have liquefied pure fuel (LNG) port terminals to interchange Russian pipeline fuel. Which means corporations are below political and business strain to cut back gas-intensive actions if fuel deliveries are lower additional.

BASF lower ammonia manufacturing at its headquarters in Ludwigshafen and at its giant chemical advanced in Antwerp, Belgium, in September.

Fertilizer big Yara (YAR.OL), which runs Germany’s third-largest ammonia manufacturing plant within the northern metropolis of Brunsbuettel, stated its output in Europe was presently 27% beneath capability as a result of rising fuel costs.

He wouldn’t specify Brunsbuettel’s charge, however added that the location doesn’t emit high-purity CO2.

SKW stated it was within the strategy of resuming full manufacturing after a scheduled upkeep shutdown, however the future charge of capability utilization was extraordinarily tough to foretell.

Chemical corporations are the most important industrial customers of pure fuel in Germany and ammonia is the one most gas-intensive product inside that business.

Firms that lower ammonia manufacturing might lose market share to imports from overseas suppliers with entry to low-cost fuel, or in Germany might settle for compensation funds below a attainable fuel rationing program to encourage producers to rapidly reduce. manufacturing to stability provide cuts. learn extra

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A lot of the ammonia goes into nitrogenous fertilizers, however different makes use of embrace AdBlue diesel exhaust fluid and engineering plastics.

Ammonia manufacturing could be a first-rate candidate for cuts to cushion any fuel provide restrictions in coming months, stated Arne Rautenberg, fund supervisor at Union Funding.

“Within the northern hemisphere, nitrogen fertilizer is utilized primarily in the course of the spring. It can be produced in the USA and shipped to Europe,” he stated, whereas including CO2 provide for the meals business might show to be a thorny situation.

BASF’s manufacturing community, particularly, doesn’t rely a lot on ammonia because it does on different fundamental chemical compounds for additional use in additional specialised downstream chemical compounds, Rautenberg stated.

Russia resumed pumping fuel by its largest pipeline to Europe, Nord Stream 1, on July 21 after a 10-day upkeep outage, however Gazprom (GAZP.MM) stated on Monday provides to Germany would fall to solely 20% of its capability. learn extra

Even earlier than the battle in Ukraine, lowered ammonia manufacturing resulting from hovering pure fuel costs in Britain final yr led to CO2 shortages within the meat and beverage industries.

That compelled the UK authorities in September to offer monetary assist to ammonia maker CF Industries (CF.N) to restart manufacturing. learn extra

Throughout regular occasions, ammonia manufacturing accounts for round 4.5% of the pure fuel utilized by German business.

Each SKW and BASF lowered ammonia manufacturing in September 2021 resulting from a rise in fuel costs.

SKW, which on the time lowered manufacturing by 20%, resumed regular manufacturing when clients accepted value will increase.

SKW can lower manufacturing at every of its two ammonia and urea manufacturing traces by not more than 20% or it must halt manufacturing fully in an costly phase-out, a spokesman stated.

Britain’s Ineos stated it was watching power prices very carefully and would “alter manufacturing to make one of the best use of low-peak power and uncooked materials purchases.”

Ammonia manufacturing has already fallen sharply in Germany resulting from excessive fuel costs, chemical business foyer group VCI stated.

SKW stated it was supplying CO2 to the meals business, with Air Liquide (AIRP.PA) performing as an middleman. BASF additionally stated it was offering CO2 by industrial gases corporations.

Trade-wide, money prices of ammonia manufacturing in Europe in the course of the first quarter have been 5 occasions the common stage in 2019 and nicely above different areas of the world, in response to information compiled by the Boston Consulting group.

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Info from Ludwig Burger Modifying by Matt Scuffham and Mark Potter

Our requirements: the Thomson Reuters Belief Rules.

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