The decrease in gas prices lowers the prices of nitrogen fertilizers in the EU and, as a result, in Ukraine

During the month, natural gas prices fell significantly amid reduced demand due to an abnormally warm winter in the northern hemisphere and increased gas reserves in Europe and the United States. Following them, the prices of nitrogen fertilizers fall.

Over the week, gas prices in Europe fell 20% to €56/MWh or $635/1000m3, and since December they have fallen 60% to a 16-month low. The reason, in addition to the warm weather, is also the economy measures taken by the EU countries, the reduction of industrial production and the increase in the supply of liquefied gas.

Thanks to a warm winter, Europe’s gas storages are 74% full, while the 5-year average for this date is 58%. In the US, as of January 20, inventories are 4.9% above the 5-year average and reaching a 2-year high.

Prices are also pressured by plans to resume operation of one of the largest LNG terminals in the USA – Freeport LNG and launch a second terminal for receiving liquefied natural gas in Germany, which will provide 25% of the country’s gas needs.

Analysts Rystad Energy and EBW Analytics Group predict that gas prices will fall over the next 30-45 days as supply exceeds demand.

April Brent crude oil futures fell 2.6% yesterday to a 3-week low of $82.8/barrel on data about an increase in US oil inventories.

U.S. crude oil inventories unexpectedly rose by 4.14 million barrels to a 19-month high, according to the EIA, although the market had expected a decline of 1 million barrels. Thus, crude oil stocks in Cushing (the basis of WTI futures delivery) increased by 2.32 million barrels to a 1.5-year high.

Against the background of lower gas prices, manufacturers and sellers of fertilizers have intensified the sale of previously produced “expensive” fertilizers, so they offer good discounts to buyers. European producers are actively reducing the prices of fertilizers, while in Ukraine the prices still remain high.

The other day, the Polish producer Agrochem Puławy announced a decrease from February 1 in prices for ammonium nitrate to PLN 2,900/t or $616/t, urea with an inhibitor – to PLN 2,760/t or $586/t, KAS 32 – to PLN 2,480/t or $527/ton. In Romania and Bulgaria, ammonium nitrate is offered at €560-590/t, urea at $630/t, NP 20-20-0+13S 570 at €640/t in big bags on FCA terms.

The increase in the supply of cheap imported fertilizers forces Ukrainian producers to lower prices for ammonium nitrate on the eve of the season, which is a unique situation. Since the beginning of February, prices for ammonium nitrate have decreased to UAH 35,000/t (including VAT and delivery), for urea – to UAH 36,000/t, KAS-32 – to UAH 29,000/t, lime nitrate – to UAH 27,000/t.

Experts predict that in the current season, Ukrainian producers will reduce the use of fertilizers by 25-35% due to financial difficulties caused by the blocking of exports and the drop in grain prices.

Tags: Ukraine, EU, prices, fertilizers