• AGF Azot is halting more production lines because high natural gas prices and weak demand for fertilizers are undermining the profitability of production.
  • Gas prices in Europe have reached 90–100 €/MWh, and plants are operating at the minimum technological level of 80–85% of capacity.
  • The company has suspended investment projects and is appealing to the EU for a gas price cap and subsidies for farmers to purchase fertilizers.

As reported by the Reuters news agency, AGF Azot—one of Europe’s largest nitrogen fertilizer producers—has started shutting down individual production lines because of high natural gas prices and declining demand for fertilizers. The company’s CEO Petr Tsingr has not ruled out further decisions to reduce production in the coming weeks if the market situation does not improve.

The Director of AGF Azot reported that fertilizer plants are currently operating at an average of 80–85% of production capacity, which corresponds to the minimum permissible technological level.

Why is AGF Azot reducing fertilizer production?

The production cut was driven by the continuous rise in natural gas costs. Natural gas is a key raw material and energy source for the production of ammonia and nitrogen fertilizers. In the first week of November, gas prices in Europe reached 90–100 €/MWh—three times higher than at the end of February, before the conflict in the Middle East escalated.

Because of the drastic gas prices, AGF Nitrogen has already shut down one production line in France, while the other operates with periodic interruptions. At its facilities located near seaports, AGF Azot has begun replacing its own production with imported ammonia.

The company argues that demand for fertilisers from European farmers has fallen to a fraction of normal volumes, because high production costs translate into high product prices, which limit farmers’ purchases ahead of the new season. Consumption of industrial ammonia has also decreased by about 50 percent.

According to AGF Nitrogen’s management, production could not be maintained at its previous level because there would not have been enough space in the almost-full warehouses. Meanwhile, restarting each production line costs several million euros, the producer noted. Demand for AdBlue, a urea-based product used to reduce transport exhaust emissions, is the only demand that has remained relatively stable.

AGF Nitrogen’s production capacity and market share

AGF Nitrogen has 8 production lines in France, Germany, Slovakia and Austria, with a combined capacity of 3,5 million tonnes of ammonia and 7 million tonnes of fertilisers per year. According to the company, its share of the European market is about 20 percent.

Due to the uncertain situation, AGF Nitrogen has also suspended all investment projects in the European chemical industry. The company is calling on the European Union to set a cap on gas prices for industrial companies and reduce the costs of carbon dioxide emissions allowances for producers of critical chemical products. The producer is also calling for support for farmers purchasing fertilisers for the next season, which could stimulate demand and help European fertiliser producers survive.