Page 29 - bne monthly magazine October 2022

bne October 2022 Cover story I 29
ing for prolonged high gas prices that it uses as a feedstock for chemical production.
"BASF is monitoring the situation and will decide, depending on the situation, on any changes to the production value chain as appropriate," it said in a state- ment as cited by Reuters.
Rival ammonia makers Yara and CF Industries said last month they were also slashing ammonia production in Europe due to soaring gas prices.
The EU’s fifth sanction package limited imports of Russian fertilisers, throwing Europe onto its own resources. At the same time as Europe has cut off imports from its biggest supplier, it has been unable to step up its own production as the exploding cost of gas is driving EU fertiliser plants out of business.
One of Europe's biggest fertiliser producers, Warsaw-listed Polish chemicals group Azoty and its listed unit Pulawy, has suspended or reduced production of some products, includ- ing nitrogen fertilisers and ammonia, due to skyrocketing prices of gas, the companies said on August 23.
“Due to record prices for natural gas,
the main production feedstock used by Grupa Azoty ... the company decided that as of August 23, it will temporarily shut down its nitrogen fertiliser, caprolactam and polyamide 6 production units,” the
European gas price
company said in a market filing. Pulawy said that it would cut its ammonia output to “about 10%” of production capacity.
“Although there are no problems with the availability of gas, the current situation in the gas market, which
consumer in the country accounting for 10% of total consumption.
The company resumed production of fertilisers and other industrial products in April with state support, but two months later discontinued the produc-
“The German chemicals powerhouse BASF
has already temporarily shut¬tered 80 plans worldwide and is slowing production at another
100 as it plans further output cuts depending on what happens to gas prices”
determines the profitability of produc- tion activities, is extraordinary and completely beyond the control of
[the group], and could not have been predicted,” the two companies said in similarly-worded statements.
Another Polish fertiliser maker, Anwil – which is owned by energy giant PKN Orlen – also said on August 23 that it would suspend production of nitrogen fertilisers due to high prices of gas.
In Romania, the operations of fertil- iser producer Azomures have been disrupted since December 2021 by high gas prices. Azomures produces 50%
of the fertilisers used by Romanian farmers and is the largest natural gas
tion of ammonia, saying at the time that it would only keep producing fertilisers until it used up all its inventory of ammo- nia. That point arrived in September, when Azomures decided to reduce its activity. Around 200 of its 1,000 employ- ees will now be either sent home under
a technical unemployment scheme or re-allocated to other companies.
Power
The wild swings in gas prices have fed through to the normally placid power market, which has wreaked havoc. The power sector relies on exactly matching demand and supply, and traders are the backbone of this mechanism. If supply and demand can’t be balanced then power stations simply go offline.
While the power system is efficiently co-ordinated Europe-wide, trading in power remains a largely local business with many small traders playing a key role. The wild swings in prices make their business impossible and open up these traders to large losses if they get caught on the wrong side of a trade.
Since September 2021, nearly 30 UK energy suppliers have filed for bank- ruptcy. Bankruptcies elsewhere include Bohemia Energy, the largest alternative supplier to state-owned CEZ in Czechia, which filed for bankruptcy in October 2021, while multiple energy providers have said they will withdraw from the French market.
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