Argus Fertilizer Europe 2023

CONFERENCE REPORT

Argus Fertilizer Europe 2023

More than 700 delegates from 300 companies and 55 countries gathered at the EPIC SANA Lisboa Hotel, Lisbon, Portugal, 17-19 October 2023, for the Argus Fertilizer Europe 2023 conference.

The exhibition and networking area was a big hit with delegates at the latest Argus Europe event in Lisbon.

We report on keynote presentations and roundtable discussions at last October’s Argus Fertilizer Europe conference in Lisbon.

Soil and water – precious agricultural resources

In his opening keynote address, Gonçalo Rodrigues, Portugal’s Secretary of State for Agriculture, set out the challenge for the conference in terms of more effective fertilizer use.

The UN’s Global Campaign on Sustainable Nitrogen Management, for example, has set the goal of reducing global nitrogen pollution by 50 percent by the end of this decade – a non-binding target that, as Mr Rodrigues pointed out, is now only six years away.

Portugal’s commitment to agricultural sustainability was also highlighted by Mr Rodrigues:

“The challenge I give you for these three days is to discuss how we can do better and improve, focusing on our natural resources, especially soil and water, because [their] contamination is a big issue in Europe. So we need to find a better way to cope with this.

“It’s essential to remember that soil is a vital and limited, non-renewable and irreversibly precious resource. We can try to grow maize, fruits vegetables, whatever, but without soil we cannot do that. We cannot keep on improving our [growing] techniques, we cannot strive to feed our population, we can do nothing without soil.

“[We] have more or less 700 people in Lisbon for the next three days to discuss the best techniques possible, to improve what we are doing today, and look to the future path we need to take. We can navigate the complexities and opportunities that lie ahead, ensuring that we are resilient, efficient, sustainable – because we need to focus on [both] the present and the future generations to come.

“It’s a big honour to have you in Lisbon. Thank you for your dedication as we try to shape the future together.”

European gas market briefing

Lawrence Templeton, VP for European natural gas and electricity at Argus, briefed delegates on Europe’s natural gas market. The market was at the crossroads currently in Templeton’s view.

“Why a crossroads? Simply put, the future increasingly in the European natural gas market does not look like the past,” Templeton said. “We’ve entered an era of increased uncertainty both in terms of supply and in terms of demand for natural gas in Europe.”

In terms of market fundamentals, there’s been a reconfiguration in Europe’s natural gas supply following the slowdown in Russian deliveries that began in the second half of 2021. These had accounted for 40-45 percent of European supply historically.

The key supply development in the European market over the last 2-3 years, suggested Templeton, has been the pivot away from a reliance on Russian supply towards liquid natural gas (LNG) instead.

“The big story is LNG – natural gas on water, on boats – it’s now a global market to which Europe is exposed,” said Templeton. “The increase in European reception capacity has increased Europe’s ability to absorb [LNG] supply in the global economy, and we expect the build out [of this capacity] in Europe to continue over the coming years.”

Europe’s gas market looked well supplied last October ahead of winter in the northern hemisphere. “Over the summer of 2023, we’ve seen the highest stock build and levels of stock since we’ve been tracking this data, much higher than the 2015-2019 average,” commented Templeton.

European gas demand in winter has also reconfigured, with household consumption, in particular, partly decoupling from outside temperature, as Templeton explained:

“[Last winter] We saw significantly reduced demand from the household sector as well as from industrial clients and manufacturers. So we’ve got a double change here – and this is why we say the future looks increasingly less like the past.

“Not only do we have a reconfiguration on the supply side we have a reconfiguration of demand too. And it remains to be seen if we’ll return to historical behaviour when it comes to how people consume gas in households.”

The panel in this keynote discussion asked if Europe can successfully decarbonise its fertilizer industry without damaging output. From left to right: Argus moderator Oliver Hatfield, IFA’s Laura Cross, Maen Nsour and Bart Pescio of OCI

PHOTO: ARGUS

Europe’s nitrogen market

Following the extreme price volatility of last few years – and corresponding swings in the fertilizer affordability index – a softening in fertilizer prices during 2023 has seen a turnaround in affordability, according to Oliver Hatfield, VP for fertilizers at Argus.

“High prices have cured themselves in the sense that we’ve seen farmers reducing applications – not just in Europe – with prices effectively rationing demand to the extent that prices have bottomed out,” Hatfield said. “The nature of the market has also changed. There’s now much more caution around purchasing, much more hand to mouth buying.

Oliver Hatfield, Argus VP for fertilizers, provided a typically thorough and insightful European nitrogen market briefing.

PHOTO: ARGUS

“This means that the market in general is a lot more precarious. Stock levels in relative terms are a lot lower than they would otherwise be, but we have moved through a transition from a situation where supply was short and prices were high to more or less the reverse of that.”

Natural gas price volatility has affected EU nitrogen production costs, resulting in the idling and closure of capacity and boosting imports from outside the region (Fertilizer International 517, p32). Consequently, European supply has been similarly precarious.

“We could see [European ammonia] capacity start to turn down again. We have seen capacity come back over the last six to 12 months because gas prices and market conditions have allowed it,” said Hatfield. “But we’re getting close, based on the [gas price] spike of the last few weeks, to a situation where production costs could challenge those economics.”

European farmers have a preference for nitrate fertilizers such as calcium ammonium nitrate (CAN) over urea and, in general, are prepared to pay a premium for this.

“That preference is not completely inelastic,” commented Hatfield. “Substitution [of urea for CAN] will take place if the premium for nitrates exceeds a certain threshold, which is what has happened over the last couple of years, with nitrate production costs in Europe driving up prices and making it unaffordable.

“This has drawn in large volumes of urea imports, not only from traditional but also from non-traditional sources. There are substantial alternative sources of [low cost] supply for urea all primed and ready to ship urea to the European market.”

Over the last year, European urea supply sources have included Algeria, Russia, Nigeria, Egypt, Iran and central Asian countries. This shift in supply has also resulted in greater European dependence on the urea spot market. The upshot has been much greater price volatility, said Hatfield, with dramatic urea price swings as high as $100/t in a single week.

Can Europe decarbonise?

In this moderated session, Oliver Hatfield sat down to discuss progress on fertilizer industry decarbonisation with Laura Cross, director of market intelligence at the International Fertilizer Association (IFA), Bart Pescio, OCI’s head of commercial strategy, and Maen Nsour, the CEO of the Arab Potash Company (APC).

He asked the panel if they thought that decarbonisation was progressing fast enough – and, if not, why?

Laura Cross agreed that the fertilizer industry could definitely move faster, and suggested that two drivers were delaying decarbonisation efforts and the shift to green and blue ammonia:

“The first is broadly the macroeconomic climate,” said Cross. “It’s easy to underestimate how much capex inflation – and the change in lending environment – we’ve seen in last two years.

“There was a period when we were tracking green and blue ammonia project announcements almost daily. [Now] when you look at projects that have slowed down or been indefinitely delayed, the two main drivers factors being cited are, one, it’s now much more expensive to build these projects – because there’s increased demand for capex – and, two, it’s much more expensive to borrow the money to invest.

“The second driver is really about two parallel needs we’re seeing playing out. So, on the one hand, we recognise the importance of decarbonising fertilizer production, but you also have the [emerging] role of ammonia as an energy carrier. That makes it more complex to forecast – as a lot of these new uses of ammonia don’t really exist today.

“In the not-too-distant future, there are projections of ammonia consumption reaching the triple digit millions of tonnes, based on the use of ammonia in the marine sector as an energy carrier, for power generation etc. But that’s not the same investment case as for an established market.”

Currently, there are established nitrogen fertilizer producers wishing to decarbonise their production, alongside new large-scale green and blue ammonia project developers entering the market with different aims and objectives. Nitrogen producers are also pivoting away from fertilizers towards the energy market. This means that the future pathway to decarbonisation is not entirely clear or straightforward, as Cross explained.

“We have companies, who were not present in the fertilizer and ammonia space a few years ago, investing billions of dollars into ammonia capacity,” said Cross. “Then, at the same time, we have established fertilizer producers who are really interested in re-marketing themselves as energy companies.

“There is a space for both. But, personally, I believe this is what’s slowing the pace – the chain of events and/or drivers leading to decarbonisation are not straightforward.”

Bart Pescio agreed with Laura’s assessment:

“OCI is building the first world-scale blue ammonia plant [at Beaumont in Texas]. It’s happening. We are going at the speed at which the market develops – we believe in this transition and we will be part of it.

“While I cannot speak for others, OCI believes there is a market appetite [for low carbon ammonia] – as the carbon intensity of goods will become part of commercial transactions when CBAM [the EU’s carbon border adjustment mechanism] is introduced. [But] it’s going to be a difficult road given that, unfortunately, not everything is subject to the same taxation.”

Arab Fertilizer Association (AFA) countries in the Middle East and North Africa (MENA) region, which are responsible for around 33 percent of global fertilizer exports, need to be included more in the dialogue and action on decarbonisation, suggested Maen Nsour. These countries have different economic incentives as they fall outside the policies which are driving decarbonisation in Europe and North America.

“I have to be extremely candid. The movement [towards decarbonisation] is not going to continue at the speed everyone wishes,” NSour said. “You [Europe] will be flying in one direction at a certain speed and hoping that everybody will act like flying geese in formation. This is not happening and will not happen.

“You have to understand the priorities of other countries and … how we can come up with conduits [on decarbonisation] that will be needed very soon to make a big difference [globally]. It’s crucial that we [Europe] understand what’s happening on the other side of the Mediterranean and try very hard to build channels of communication – so we [act] in the best interests of everybody and not only those [countries] in the north.”

Fertilizers and sustainable food

In this session, Ruben Eussen, OCI’s global head of product manufacturing and development, and Dennis Bakx, global sustainability manager for raw materials at European drinks giant Heineken, discussed the fertilizer industry’s contribution to the decarbonisation of agriculture and the switch to low carbon farming. Oliver Hatfield was on hand to moderate.

OCI is pursuing two low carbon ammonia projects currently:

• The under-construction 1.1 million t/a capacity Beaumont blue ammonia project in Texas. The project, which will sequester 1.7 million t/a of carbon dioxide and reduce production CO2 emissions by 70 percent, is on track for completion in 2025.
• OCI subsidiary Fertiglobe also launched the Egypt Green Hydrogen project in 2022, as part of a consortium with Scatec, Orascom Construction (OC) and The Sovereign Fund of Egypt (TSFE). These partners have committed to building a green hydrogen plant with a 15MW polymer electrolyte membrane (PEM) unit in Ain Sokhna, Egypt, in the project’s first phase. This plant will produce 8,000 t/a of green ammonia initially, with plans to ultimately scale up production to 90,000 t/a.

OCI is also driving down the carbon footprint of the Nutramon calcium ammonium nitrate (CAN) fertilizer it produces in the Netherlands. This already has a 40-50 percent lower carbon footprint than conventional CAN thanks to the use of biomethane feedstocks.

The use of blue ammonia in the manufacture of Nutramon will reduce its carbon footprint by 50-55 percent, and the switch to a green ammonia feedstock, when this becomes available from 2024, will ultimately reduce its footprint by 70-75 percent.

Ruben Eussen, in his presentation, highlighted two pioneering food projects using low carbon Nutramon fertilizer:

• OCI, German agricultural trading company AGRAVIS Raiffeisen AG and Dossche Mills are collaborating on a project to manufacture low carbon wheat flour for use in bread making and other food staples. The wheat, which was harvested from fields in Germany in summer 2023, is currently being milled and distributed as lower carbon flour to food manufacturers.
• OCI also delivered its first UK shipment of Nutramon to Simpsons Malt Limited in March 2023 as part of a new project to reduce the carbon footprint of malting barley and distilling wheat.

Heineken, as Dennis Bakx explained, is also driving down agriculture emissions by rolling our a low carbon farming programme (LCFP) for its barley growers. The company is committed to reducing its ‘Scope 3’ agricultural emissions by 30 percent by 2030. This is part of a concerted drive by Heineken to grow sustainable barley and make lowcarbon beer. This is being increasingly demanded by the retailers Heineken supplies.

The LCFP incorporates precision farming and regenerative agriculture and actions such as:

• The use of cover crops and crop residues
• No tillage or reduced tillage practices
• Reduced fertilizer usage
• Use of nitrogen inhibitors to prevent environmental losses from fertilizers.

The programme was expanded from 200 farming pilots in 2022 to 300 pilots in 2023 and is on track to expand to 500 pilots by 2025. Heineken’s ultimate aim is to massively scale-up the LCFP to more than 10,000 farmers by 2030.

Argus Fertilizer Europe 2024

Building on the success of Lisbon’s 2023 event, Argus Fertilizer Europe will be returning to Athens, Greece, in October 2024 – a date to keep for your diary!