Britain’s biggest fertiliser manufacturer has announced it is to cut ammonia production, but insists that farmers will not be affected by the move.
Terra Nitrogen, which makes Nitram ammonium nitrate fertiliser, said it could no longer justify the full-scale production of ammonia because of soaring gas prices.
Fertiliser director Stuart Beer said: “We are scaling back ammonia production because we can’t afford to pay the cost of gas.
We would have to charge more than 200/t to break even at today’s gas price, and there aren’t many farmers falling over themselves to buy January stocks at 170/t plus.”
The cuts will take Terra’s gas usage back to the volumes it has already covered by buying forward.
It means the company will not need to buy from the volatile spot market, where prices hit a record high of 1.70/therm as Farmers Weekly went to press – up from 31p/therm at the start of the month due to fears of a cold winter and resultant supply squeeze.
Mr Beer insisted that Terra’s fertiliser output would not be affected, because the company had stocks of ammonia and was able to import it from abroad.
But he warned that cuts might become necessary if gas prices remained high and sales did not pick up.
“Nitram orders will be honoured because we are continuing to produce ammonium nitrate.
Our resolve to achieve prices in excess of 170/t in January is as strong as ever, but we’re running a very tight ship.”
He predicted further price rises in February and March.
Britain’s other large fertiliser manufacturer, Kemira, has shut its ammonia plant down for routine maintenance.
Commercial manager Ken Bowler said production would restart in early December, but warned that high gas prices could force him to switch the plant off again.
Importers are also finding the market difficult.
Early season sales have been brisk, but there are few takers at current high prices.
Kemira is forecasting a 7% fall in overall sales this year.
Other agricultural users of gas are also struggling with higher costs which have fed through to electricity contracts.
Chris Holmes, chief executive of Carrs Milling Industries, said his electricity costs had jumped 40% recently, adding 2/t to flour milling costs and over 1/t to animal feed.
“It’s very difficult to recover those costs,” he said.
Major industrial users of gas in the UK are lobbying the government for help, arguing that the futures market for gas does not work properly.
They want ministers to act before new gas supplies come on tap next year.