With the “in day” gas price peaking at £1.50/therm and forward prices up to £1.00 it is little surprise that energy costs hit the headlines over the weekend.
UK fertiliser producer, Terra Nitrogen, has turned down its ammonia plants at Tees and Severnside because the cost of production exceeded the viable selling price.
This is a crisis about ammonia production, however, not fertiliser, whose production will continue as normal from existing ammonia stocks and buying on the world markets.
The farmer seems quite willing to continue to wait and see, purchasing fertiliser now only when needed.
Product is still available, both domestic and imports, and stocks of the latter are building, though they could dip in the spring.
For Terra, the economics are simple.
With farmers not buying fertiliser at the £170/tonne or more required to cover expensive gas costs, it is pointless to continue ammonia production when gas prices will come down later in the season.
The company is riding out a two-year period until gas availability is increased in the UK, which should smoothe out the wilder price fluctuations.
The UK’s other major ammonia producer, Kemira GrowHow, faces a similar dilemma.
Its Cheshire plant is undergoing routine maintenance and will soon be fired up again for re-commissioning.
Whether it remains in production also depends on the relationship between gas and ammonia prices.
The UK fertiliser industry will take a hard blow to profits, but is not likely to disappear in the immediate future.
CURRENT PRICES (£/t)
Domestic N (34.5%N) SP5
Imported AN (Russian)
Muriate of Potash(60%K2O)
20.10.10 / 27.5.5
|Autumn grades (PK)|
|Copper, zinc, selenium,|
cobalt Iodine and sodium
Straight and compound
Republic of Ireland†
|No market||No market|
†Note in the Republic of Ireland nutrients are expressed as elements not oxides. Analyses will not be directly comparable with those used in the UK.
*Known as 24.2½.10 blend in the Republic of Ireland
**Known as 27.2½.5 in ROI
Note All illustrated prices are based upon 24 tonne loads for immediate payment. Prices for smaller loads and those with credit terms will vary considerably.