Jacob Hansen, Director General of Fertilizers Europe
What does Europe’s decoupling from Russia mean for the domestic fertilizer industry?
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Beyond the suffering and humanitarian tragedy of Russia’s invasion of Ukraine, the entire global economy will feel the side effects of the conflict. Europe is especially exposed due to direct trade and cooperation across the economy and thus its political leaders have vowed to reduce reliance on key Russian exports.
The European fertilizer industry has condemned the Russian invasion of Ukraine and voiced its unequivocal support for sanctions put forward by the EU. The industry has also recognised the need to act decisively to reduce the dependency on Russian raw materials and fertilizers. However, given that in past years Russia has been a key third country for the EU fertilizer industry and for fertilizer consumers alike, the scale of the challenge cannot be underestimated. A combination of solutions will be necessary to shift industry supply chains and normalise the market situation.
The fertilizer industry is the main natural gas consuming industry. With the EU being highly dependent on Russia for gas supplies (over 40% of the EU’s imports), the fertilizer sector is highly exposed to the commodity’s price volatility and availability. The European Commission announced plans in March 2022 to make Europe independent from Russian fossil fuels well before 2030. The plan stipulates the introduction of a series of measures to respond to rising energy prices, diversify Europe’s gas supply, and accelerate the clean energy transition.
Reducing the reliance on Russian gas means that the European fertilizer industry must secure alternative sources of gas supply, while at the same time accelerating the transition towards low-carbon production. While the sector is already investing in low-carbon technologies, public support at the EU and member state level needs to be bolstered if the transition is to be accelerated.
Besides having a dominant position in the raw materials sector, Russia has also been one of the main nutrient exporters to the EU, with 30% nitrogen and 36% urea fertilizer imports.
Together with Belarus, Russia accounted in recent years for around a 40% share of global production and supply of potash and phosphate rock. The EU consumption of potash and phosphorus has largely been based on imported products primarily sourced from Belarus and Russia, with only 22% of phosphorus and 15% of potash needs satisfied by domestic production.
To fill this huge supply gap, a combination of alternative supplies will be needed. On the one hand, Europe will be looking at new sources of supply. On the other hand, Europe must explore the potential of circular solutions, promoting innovative techniques such as recovery of nutrients from sewage sludge. All these efforts are likely to require additional resources, adding pressure to an already strained agricultural sector.
Most importantly, we have to ensure Europe makes the most of its available resources. In the energy sector, energy efficiency is often called the ‘first fuel’ as it represents the cleanest and the cheapest way to meet energy needs. For fertilizers, it translates into making the most of available nutrients in order to improve yields and reduce nutrient losses. Nutrient use efficiency combined with digital tools and nutrient management tools must be promoted across Europe as the low hanging fruit to improve the resilience of the EU agricultural sector.