European fertilizer stakeholders seek clear roadmap around decarbonization: panel

With the start of the EU legislative session, European fertilizer stakeholders are seeking a clear roadmap for the path ahead as they grapple with key issues around competitiveness and decarbonization, panelists said at Fertilizers Europe's annual meeting in Brussels.

Cheap Russian and US fertilizer imports, along with aging European power plants, are making it difficult to compete particularly now that size and scale are vital for success in the decarbonization era, said Leo Alders, president of Fertilizers Europe, an industry association representing 80% of the European nitrogen fertilizer producers.

“We need to be more sustainable, but we also need to be more competitive,” Alders said. “Europe has (put) itself into a position where the basic cost of energy is too expensive to be competitive."

To become more competitive, Europe would need to rebuild an aging fleet where the typical ammonia plant is around 400,000 mt/year capacity, Alders said. By comparison, most modern plants produce upwards of 1 million mt ammonia/year, he said. Sanctions have not impacted Russian fertilizer imports into Europe, Alders said. Russian ammonia producers are paying roughly Eur2/MWh for natural gas used in ammonia production, compared with nearly Eur40/MWh for TTF gas, according to Platts, part of S&P Global Commodity Insights.

"Russia is importing more and more urea into Europe - they put their cost just below ours," he said. "Their margins are tremendous."

Potentially, a way to compete with cheap imports from the US and Russia could be through the Carbon Border Adjustment Mechanism, which takes effect financially in 2026. At first, the fertilizer industry resisted CBAM fearing its impact on carbon allowances and carbon leakage. But with cheap imports flooding Europe, members are ready for it as a way of penalizing higher carbon import products, Alders said.

Achema shelved Eur122 million electrolysis project

Lithuanian producer Achema looked to start producing low carbon Ammonium Nitrate and liquid nitrogen at its 400,000 mt/year plant, but in August shelved its plans on a Eur122 million electrolysis project because it could not meet the minimum threshold for CO2 emissions, the company’s CEO, Audrone Kuskyte, said.

The company was using 90% renewable energy and 10% natural gas, but its CO2 emissions went above the minimum 88 grams CO2/hour allowable under the EU standards, she said. The rule to calculate CO2 on an hourly basis made it too difficult to use hydrogen produced through alkaline electrolysis, Kuskyte said. In the end, Achema did not use the funding because it could not meet the minimum threshold, she said.

Instead, Achema will turn its attention to carbon capture and storage, as an alternative to renewables-based production, she said.

The fertilizer industry is paying more attention to CCS and other carbon management strategies as part of the whole value chain, which includes transportation and storage, said Alexandre Paquot, director for climate action with the European Commission.

European industrial competitiveness was the subject of a report released Sept. 9 by former Italian Prime Minister Mario Draghi -- called "The future of European competitiveness," which speakers referenced during the panel session.

The Draghi report is a “very useful wakeup call,” which is relevant to fertilizer and other energy intensive industries, Paquot said. Industry needs to think about operating as well as capital expenses, he said.

"There is one thing to keep in mind," he said. "Decarbonization is the driver for growth if all policies are aligned. The main challenge is to align all policies."