Oslo March 12 2022: Norwegian international ammonia and urea producer Yara has stopped sourcing supplies from all Russian companies linked to EU sanctions, the company said March 11.
“As a result of the sanctions imposed by the EU on persons linked to certain Russian fertilizer producers, Yara is stopping sourcing from Eurochem, Uralkali, Uralchem, and PhosAgro effective immediately while we carry out a detailed review of the scope and implications of the sanctions,” a company spokesperson told S&P Global Commodity Insights in an email.
The EU further extended sanctions against Russian individuals and companies on March 9, naming several company executives in the fertilizer and chemical sectors.
Yara had already cut fertilizer production at two European plants because of rising gas prices.
Ammonia and urea production is expected to be at 45% capacity at its Ferrara and Le Havre plants in Italy and France, respectively, the company said March 9. The two plants have a combined annual capacity of 1 million mt ammonia and 900,000 mt urea.
Major market disruption
Russia and Ukraine are both major exporters of ammonia and fertilizers, and Russia’s invasion has disrupted global markets.
Yara’s move is expected to further disrupt European ammonia markets, which have lost Black Sea exports due to the closure of the Yuzhny port and pipeline amid the war in Ukraine. Yara agreed to an April Baltic contract price at $1,155/mt March 1 with several Russian exporters, including Eurochem, to distribute ammonia to production facilities owned by Yara in Europe. Significant volumes from the Black Sea and Middle East move under the contract.
“I am not sure how long Europeans will continue to buy because they could also decide to cut imports as well, but if they do I think it will come more from Trinidad,” a European trader said.
A trade was heard March 11 at $1,525/mt for a 15,000 mt cargo sourced from Algeria. The higher price “could kill demand for many others,” the trader said. “Not sure everyone can align on… [this price],” he added.
S&P Global Commodity Insights assessed CFR Northwest Europe at $1,525/mt March 11, up $185 from March 10 and the highest price since S&P Global launched ammonia assessments Oct. 12.
European buyers could be forced to buy from the Middle East, North Africa, North American or Caribbean markets to make up for the loss of Russian supply, the trader said.
Yara said March 11 it would use its global production system to keep supplying customers and secure continuity in food supply chains.
The company repeated its call for government action to “protect food supply chains and decrease dependency on Russia.”