BASF eyes further ammonia production cuts in gas supply crisis sources

By Ludwig Burger

FRANKFURT (Reuters) – Germany’s BASF, the world’s biggest chemicals company, is considering further cuts in ammonia production due to soaring natural gas prices, two sources familiar with the matter said, with ramifications potential from agriculture to soft drinks.

Germany’s biggest ammonia maker SKW Piesteritz and number four Ineos also said they could not rule out production cuts as the country grapples with a disruption in Russian gas supplies.

Ammonia plays a key role in the manufacture of fertilizers, engineering plastics and diesel exhaust fluid. Its production also produces high-purity carbon dioxide (CO2) as a by-product, which is needed by the meat and soft drink industries.

Unlike many European countries, Germany does not have liquefied natural gas (LNG) port terminals to replace the Russian gas pipeline. This means that companies are under political and commercial pressure to reduce gas-intensive activities if gas deliveries are further reduced.

BASF reduced ammonia production at its headquarters in Ludwigshafen and at its large chemical complex in Antwerp, Belgium, in September. Its production rate is still reduced and could be reduced further, although the company will look closely at the ripple effects, the two sources said.

BASF told Reuters it would continue to meet its internal ammonia needs and external customer demand, declining to disclose plant utilization rates.

Fertilizer giant Yara, which runs Germany’s third-largest ammonia production site in the northern town of Brunsbuettel, said its production across Europe was currently 27% below capacity due to skyrocketing gas prices.

He would not specify Brunsbuettel’s rate, but added that the site does not deliver high-purity CO2.

SKW said it was in the process of resuming full production after a scheduled maintenance shutdown, but the future capacity utilization rate was extremely difficult to predict.

Chemical companies are the largest industrial users of natural gas in Germany and ammonia is the most gas-intensive product in this industry.

Companies that reduce ammonia production may lose market share to imports from foreign suppliers with access to cheap gas, or in Germany could accept compensation payments under a potential gas rationing program to encourage manufacturers to rapidly reduce production to compensate for supply cuts.


Most ammonia goes into nitrogen fertilizers, but other uses include AdBlue diesel exhaust fluid and engineering plastics.

Ammonia production would be a prime candidate for cuts to cushion any gas supply cuts over the coming months, said Arne Rautenberg, fund manager at Union Investment.

“In the northern hemisphere, nitrogen fertilizer is applied primarily in the spring. It can also be produced in the United States and shipped to Europe,” he said, while adding the CO2 supply for the food industry could prove to be a thorny issue.

BASF’s production network, in particular, is not as reliant on ammonia as other commodity chemicals for later use in more specialized downstream chemicals, Rautenberg said.

Russia resumed pumping gas through its largest gas pipeline to Europe, Nord Stream 1, on July 21 after a 10-day maintenance hiatus, but Gazprom said on Monday supplies to Germany would fall to just 20 % of its capacity.

Even before the war in Ukraine, reduced ammonia production due to soaring natural gas prices in Britain last year caused CO2 shortages in the meat and drink industries.

This forced the UK government in September to provide financial support to ammonia maker CF Industries to restart production.

In normal times, ammonia production accounts for around 4.5% of the natural gas used by German industry.

SKW and BASF both reduced their ammonia production in September 2021, due to a spike in gas prices.

SKW, which at the time had cut production by 20%, resumed normal production when customers accepted price increases.

SKW can cut output from each of its two ammonia and urea production lines by up to 20% or else it would have to suspend production entirely in a costly ramp-down, a spokesperson said.

Britain’s Ineos said it was monitoring energy costs very closely and “will adjust production to make the most of low-peak energy and raw material purchases”.

Ammonia production has already been drastically reduced in Germany due to high gas prices, chemical industry lobby VCI said.

SKW said it supplied CO2 to the food industry, with Air Liquide as the middleman. BASF also said it supplies CO2 through industrial gas companies.

(Reporting by Ludwig Burger Editing by Matt Scuffham and Mark Potter)