Beyond Gas. The risks of Fertilizer Dependence for the EU
Shifting Market Landscape
Energy market changes sparked by Russia’s invasion of Ukraine have exposed a critical vulnerability in Europe’s food security. Natural gas prices, constituting roughly 90% of production costs for nitrogen fertilizers, skyrocketed due to the conflict, causing fertilizer prices to soar in 2022-2023. Even though, fertilizer prices went down, and the EU successfully its reduced energy reliance on Moscow, a new challenge emerges as Russia strengthens its role as a key supplier of fertilizers to the EU, with Russian fertilizer imports to EU increasing by 60% between 2020 and 2023.
The energy and consequent mineral fertilizer crisis highlights the need for greater autonomy in the production and use of fertilizers. As Russia is bolstering its position as a crucial fertilizer supplier to the EU, a strong domestic fertilizer industry becomes more essential than ever and can help the EU navigate such crises more effectively.
Surge in Russian fertilizer imports
In 2020, EU imports of Russian urea-based fertilizers amounted to 1.04mt.
Between the agricultural season 20/21 and 22/23, imports from Russia increased by 103% amounting to 137.8 KT in 22/23.
European farmers are progressively reliant on fertilizers that fall short of meeting high production standards aimed at curbing carbon emissions and promoting environmentally friendly alternatives.
The impact of the energy crisis on the EU fertilizer industry
This massive increase in imports of Russian fertilizers has been detrimental the EU’s industry which had already been suffering from an unprecedent surge in natural gas prices. 70% of the EU ammonia industry temporarily closed in September 2021. At the beginning of 2023, 40-50% of total EU ammonia plants were still shut down and only at present the situation is almost going back to normal, though 10-20% of EU production is still suspended. In the past months, EU ammonia plants were also forced into permanent closure. The most significant example is given by BASF’s closure of an ammonia plant in early of 2023, which led to 2,600 people losing their jobs.
Though EU ammonia and fertilizer plants are reopening, the current situation is seriously threatening the sustainability of the EU fertilizer industry in the medium-long term.
EU Imports of Russian fertilizer financing the war
On 1 October 2023, Russia introduced a temporary export duty for fertilizers of up to 10% with the specific aim of financing the war effort.
Whereas Europe reduced its dependency on Russian pipeline gas, we are now importing Russian gas in a form of nitrogen fertilizer. Moreover, on January 1, 2024, the law on tax on excess profits in the Russian Federation entered into force. The Ministry of Finance of the Russian Federation announced that for 2023 the budget received nearly 3.15 billion EUR from excess profits, of which €600 million (20%) were generated by imports of fertilizers.
This means that every tonne of fertilizer exported to the EU is contributing directly to financing the war in Ukraine.
A stronG agri-food system in eu key for EU Strategic Autonomy
The EU is in the process of decoupling its economy from Russian gas as a matter of European security and strategic autonomy. Yet, the EU risks becoming increasingly dependent on Russian fertilizers, which is gas in the form of feedstock.
This increasing dependency on Russian raw materials is threatening the security and affordability of EU’s food supply, leading to the weaponization of resources from the Russian regime. The latter, as already shown in the case of natural gas, cannot be treated as a reliable partner, especially when it comes to strategic sectors such as agriculture.
Boosting Domestic, Low-Carbon Fertilizer Production in the EU
The EU should introduce measures that guarantee autonomy and independence from Russian inputs and invest in low-carbon domestic production of fertilizer, in line with the EU Green Deal objectives.
The EU fertilizer industry has the necessary capacity to supply nitrogen fertilizers to EU farmers.
EU fertilizers producers have the necessary capacity to ensure EU farmers have access to nitrogen fertilizers, without having to rely on Russian urea imports. In 2022, the total EU- 27 consumption of nutrients was 16mt, of which around 9.3mt was attributed to nitrogen fertilizers. The EU’s total production capacity is 14.8 million. The European market is an open market and the imported products’ share of EU consumption is historically around 32% of the EU’s demand.
The EU fertilizer production facilities are strategically positioned across the European Union and are strategically best placed to supply local farmers with high-quality nutrients .
Why a Strong European Fertilizer Industry Matters
Ensuring food security
Fertilizers enable 50% of food production, contributing to food security in Europe and beyond. The industry is essential to provide European consumers with nutritious, affordable, and sustainable food, supporting the objectives of the EU Farm to Fork strategy. A strong EU industry is key to ensure the security and affordability of EU’s food supply.
Powering the Hydrogen Economy
The EU fertilizer industry produces about 40% of total European hydrogen as raw material of ammonia production. It is therefore also uniquely placed to contribute to the objectives of the EU Green Deal and the development of a green hydrogen economy in Europe.
Driving Climate Neutrality
The European fertilizer industry is committed to contributing to the decarbonization ambitions in Europe. The industry is already investing in several low-carbon technologies and it has published an ambitious roadmap to transition to climate neutrality. The industry pledges to achieve a substantial 70% reduction in their Scope 1 and 2 greenhouse gas emissions compared to 2020 levels. The ultimate goal is set for 2050, where European fertilizer production aims to be completely climate-neutral.
Supporting EU farmers and sustainable farming
The European fertilizer industry stands by EU farmers as a reliable partner, committed to their success and environmental stewardship. EU-produced fertilizers typically have a smaller carbon footprint compared to the global average, reflecting the industry’s commitment to sustainability. Additionally, a robust, integrated distribution network ensures farmers receive the essential products they need, when they need them.