Soaring Natural Gas Prices Hurt Global Production

Yara, CF, and Others Curb Production Amid High Gas Prices

Yara International (YARIY) and CF Industries (CF) are among the energy-intensive companies reducing production in response to record-high global prices for natural gas. Companies in steel producing, fertilizer manufacturing, and glassmaking have had to halt and reduce European and Asisan production due to energy prices.

Yara, which is among the biggest fertilizer makers in the world, said it was slashing its ammonia production in Europe by 40%. Meanwhile CF Industries is stopping production in two UK plants because of natural gas costs. Those moves are impacting a number of other industries. For example, meat processors and soft drink manufacturers are facing a shortage of carbon dioxide used in food packaging. This is because shutdowns at fertilizer plants are hurting the supply of CO2.

Gas Prices Skyrocket in Europe and Asia

Prices for natural gas have been climbing for several months, driven by increased demand in Asia, lower-than-usual gas inventories, and tighter supplies from Russia. In Europe, gas prices have climbed over 250% in 2021. Asia has seen a 175% increase in prices. Natural gas prices in the US are also at multiyear highs and double where they were at the start of the year.

To prevent natural gas prices from rising in the US, the Industrial Energy Consumers of America trade group which represents the chemical, food, and materials industries has asked the US Department of Energy to stop natural gas producers from exporting gas.

Steel Companies Feel the Pinch

Steel companies are also feeling the impact from rising gas prices. Some steelmakers suspended operations when energy prices hit peak levels. British Steel (BSC) has not reached that point yet, but the UK’s biggest steelmaker said it is impossible to make steel profitably at certain times of the day.

There could be relief toward the end of the year as more supply of gas becomes available. Norway has signed off on increasing gas exports and more natural gas is expected to flow from Russia near the end of the year. For now though, consumers and investors should brace for more disruptions as energy prices continue to soar.

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