No end to fertilizer price hike yet

The year 2021 was an extraordinary one. Fertilizer prices for greenhouse growers rose by more than 40%. The end does not seem to be in sight either, warns fertilizer manufacturer Yara. This year has begun with significant fertilizer price increases. On its website, Yara shares this explanation of how these prices have come about.

The rising gas prices, the Chinese market, high container fees, and sanctions against Belarus all contribute to these climbing prices. As does the global pandemic. All these factors bring about rising cost prices, and shifts in supply and demand in the world market.

External factors influence higher cost price
Gas prices have a major impact on the cost price of ammonia production, an energy-intensive process. Nitrogen fertilizers use ammonia as a raw material. It thus dramatically affects these fertilizers' prices. Extracting phosphate from phosphate rock also requires much energy. On top of that, the energy market is not yet showing a positive trend either. Russia's gas supply remains low. Also, demand rose with the colder weather in early December. So, both gas and electricity prices rose, leading to increased cost prices.

Logistical costs climb due to rising container rates
Rising logistical costs are affecting the cost price too. Current container rates are almost triple those of a year ago, and not only are sea, but also road transport costs are increasing. Those are due to staff shortages and higher fuel prices.

Great global demand for fertilizer
Global supply and demand also determine fertilizer prices. China's local need for chemicals and fertilizers continues to grow. That is leading to increasing import requirements. The Chinese government is increasingly restricting exports too. Producers elsewhere have to now adsorb these decreased Chinese export volumes. As a result, far less phosphate is available on the world market.

Belarus is the world's top potash producer. Due to political developments, sanctions against this country are imminent. These already exist against some other Eastern European countries. The supply is, thus, decreasing while demand is increasing. That is partly because there is less nitrogen and phosphate on the market.

Also, high sea freight container fees mean it is no longer profitable to import relatively inexpensive fertilizer from Asia. Demand for this product remains high in countries like India, South Korea, and Brazil. This shift from supply to demand is hiking prices up.

Pandemic is limiting sulfur production
And then there is COVID-19. This, too, plays a vital role in pricing. Some fuel production processes release sulfur as a byproduct. The pandemic has reduced global transportation movements. Therefore, less fuel is being produced, reducing the supply of sulfur products.

The highly contagious Omnicron COVID-19 variant is expected to further disrupt logistical chains. The International Transport Workers' Federation (ITF) is already talking about an "Omicron crew crunch" for the shipping industry.

A perfect storm
In short, all these factors impact the prices of all basic fertilizer components (nitrogen, phosphate, and potash, or NPK) differently. In the past, one component's price would rise, and another's would fall. However, due to this confluence of circumstances, all components' prices are rising across the board. And there is no sign of a price decrease either.

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