The impact of the energy crisis on fertilizer has not ended

It has been one year since the Russian Ukrainian conflict broke out on February 24, 2022. During this year, natural gas and fertilizers were the two most affected petrochemical industry commodities. From the current situation, although the price of fertilizer is returning to normal, the impact of the energy crisis on the fertilizer industry is still difficult to end.

Starting from the fourth quarter of 2022, major natural gas and fertilizer price indices around the world have all experienced a decline, and the entire market is returning to normal. From the fourth quarter financial reports of fertilizer industry giants in 2022, although their sales and net profit are still considerable, their financial data is generally lower than market expectations. For example, Nutrien’s revenue for the quarter increased by 4% year-on-year to $7.533 billion, slightly higher than market expectations, but the year-on-year increase was lower than the 36% increase in the previous quarter. CF Industry’s net sales for the quarter increased by 3% year-on-year to $2.61 billion, below market expectations of $2.8 billion. Meisheng has also experienced a decline in profits. These enterprises generally believe that in the high inflation economic environment, farmers have reduced the use of fertilizers and controlled the planting area, which is an important reason for their relatively average performance. On the other hand, it can also be seen that the global fertilizer market in the fourth quarter of 2022 did indeed experience a chill, exceeding the original market expectations.

However, even though the price of fertilizer has fallen back, even affecting corporate profits, the market’s concern about the energy crisis has not diminished. Recently, Yara executives said that market participants were not sure whether the industry had come out of the global energy crisis. At the root, the problem of high natural gas prices is far from being solved. The nitrogen fertilizer industry still needs to pay high natural gas costs, and the cost of natural gas prices is still difficult to digest. In the potassium fertilizer industry, the export of potassium fertilizer from Russia and Belarus remains a challenge. The market has predicted that Russia’s potassium fertilizer export will decrease by 1.5 million tons this year, making it difficult to fill the gap. In addition to the increase in energy prices, fluctuations in energy prices have also made enterprises very passive. Due to market uncertainty, it is difficult for enterprises to plan production, and many enterprises need to control production to cope. In 2023, these are potential unstable factors in the fertilizer market.

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