Yara estimates that it buys 10-15 per cent of the annual output of state-owned Belaruskali, one of the world’s largest producers of potassium salt, or potash, the crop nutrient that is a major foreign currency earner for Belarus.

The company said its purchase of potash from Belarus had been in full compliance with the sanctions but would still have to come to a halt.

“Other parts of the supply chain are withdrawing essential services required to enable potash exports from Belarus, as a result of which Yara has initiated a wind-down in sourcing activities,” the company said in a statement.

This included logistical and financial services companies, even where such services could be lawfully provided, a Yara spokesperson added.

“It is these practical challenges stemming from the sanctions, that have required us to evaluate alternative sources of supply,” the spokesperson said.

Western powers accuse Belarus’ President Alexander Lukashenko of rigging a 2020 presidential election and have piled sanctions on his regime, including restrictions on potash exports.

Exiled opposition leader Sviatlana Tsikhanouskaya has repeatedly called on Yara to suspend its activity in Belarus, and the company said in August it would consider the request.

Yara sources potash from nine suppliers globally, including Canada’s Canpotex and Germany’s K+S, according to a company sustainability report filed last year. Canpotex is the export arm for fertilizer companies Nutrien and Mosaic, which along with K+S operate potash mines in Saskatchewan.

“As part of our risk management work we continue to map alternative supply options to be able to respond to supply chain disruptions,” the company spokesperson said.

Beleruskali was Yara’s single biggest potash supplier, the spokesperson added.

Yara buys its potash from Belarus Potash Co. (BPC), Belaruskali’s sales arm. The Norwegian firm said it will seek to continue an industrial safety programme launched last year in cooperation with trade union representatives.

BPC did not immediately reply to a Reuters request for comment.

Global potash prices are set to rally after the U.S. imposed sanctions on BPC, piling more pressure on farmers and consumers already facing rocketing costs and a global economy navigating rising food inflation, analysts and industry sources told Reuters in December.

— Reporting for Reuters by Terje Solsvik and Victoria Klesty in Oslo; additional reporting by Polina Devitt in Moscow.

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The company cut back ammonia production at a number of sites in Europe from September through November following a jump in the price of the natural gas used in the manufacturing process, hitting its overall output in the region by 30 per cent.

Fertilizer prices have risen sharply this year, tracking higher energy costs, putting key crops at risk and adding to global food security and inflation fears, analysts say.

“The price of finished nitrogen fertilizer has risen in the quarter to a level where it has been profitable for us to start up production and, in addition, the global ammonia price has also risen,” a Yara spokesperson said.

The company said in a statement that while it aimed to keep supplying customers, it couldn’t rule out cutting back ammonia production again if necessary.

Rivals including CF Industries have also cut production.

Including maintenance and unscheduled outages, Yara’s European ammonia production was approximately 370,000 tonnes below capacity during the curtailments.

“The impact on finished fertilizer production has been limited, as unprofitable ammonia production has been replaced with sourcing from Yara plants outside Europe, and from Yara’s global ammonia trade and shipping network,” the company said.

CEO Svein Tore Holsether told Reuters last month that some capacity at Yara’s Dutch plants had already been brought back on stream.

European wholesale gas prices have surged as much as 700 per cent this year as demand recovered rapidly from a pandemic slump at a time of low storage levels and supply constraints.

As of Tuesday, the European benchmark was 570 per cent higher than at the start of 2021.

As a result of supply constraints, farmers in Europe have scrambled to buy urea and liquid nitrogen at elevated prices for fear of running short in the planting season.

Yara has the capacity to produce 8.5 million tonnes of ammonia per year worldwide, with 4.9 million tonnes of that coming from Europe.

Ammonia is an ingredient in finished products used to fertilize crops but also goes into explosives and for cleaning exhaust from diesel engines, among other applications.

— Reporting for Reuters by Victoria Klesty and Nora Buli; additional reporting by Terje Solsvik.

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Why it matters: The consumption of oil for transportation is one of the top contributors to global greenhouse gas emissions that cause climate change, including for farm vehicles.

By altering the production process for ammonia normally used for fertilizer, the companies said they can produce hydrogen for fuel or a form of carbon-free ammonia used either as a carrier for hydrogen or as a marine fuel to power cargo and even cruise ships.

The shift may improve their standing with environment-minded investors as fertilizer emissions attract greater government scrutiny in North America and Europe.

But the green fuels are not yet commercial and will require significant investment to turn a profit — a reality that has the world’s largest fertilizer producer, Canada’s Nutrien, staying out of the space for now. Oslo-based Yara is seeking government subsidies to proceed.

Still, renewable ammonia represents an opportunity for the equivalent of C$9.2 billion by 2030, according to Citibank. That figure is based on 20 million tonnes of annual sales globally for clean power and shipping fuel compared with virtually none now. Global ammonia sales currently amount to 180 million tonnes.

“We absolutely could be known more for being a clean energy company than an ag supplier,” CF chief executive officer Tony Will said, speaking of long-term prospects for the Illinois-based company.

Fertilizer plants separate hydrogen from natural gas and combine it with nitrogen taken from the air to make ammonia, which farmers inject into soil to maximize crop growth.

Production generates carbon emissions that CF says it can avoid by extracting hydrogen instead from water charged with electricity. It can then combine that hydrogen with nitrogen to make green ammonia, which the marine industry is testing as fuel.

CF is in discussions about selling green ammonia to a Japanese power consortium including Mitsubishi Corp., but buyers will break most of it down to pure hydrogen for use in transportation sectors.

“This is a market that easily can exceed what the total ammonia (fertilizer) market is,” Will said. “We’re going to grow into that over the next 20-25 years.”

Adopting green ammonia or green hydrogen to replace crude oil-based fuel would help the International Maritime Organization (IMO) meet a target to reduce emissions, and is suited to both short- and long-haul vessels.

Methanol and liquefied natural gas (LNG) are other clean alternatives.

“Everybody is looking for solutions and I think the jury is still out,” said Tore Longva, alternative fuels expert at Oslo-based maritime advisor DNV GL. “Of all the fuels, (green ammonia) is probably the one that we are slightly more optimistic on, but it’s by no means a given.”

Ammonia remains toxic and corrosive, requiring special handling on ships, Longva said.

Furthermore, combusting ammonia may produce nitrous oxide, a greenhouse gas, that ships would need to neutralize to prevent emissions, said Faig Abbasov, shipping director for European Federation for Transport and Environment, an umbrella group of non-governmental organizations. Fuel cells are another potential marine use for ammonia and hydrogen.

Still, Abbasov sees ammonia and hydrogen as the greenest and most practical shipping fuel alternatives, and cheaper than methanol.

Development of ammonia and hydrogen for shipping fuel holds decarbonization potential but is at the pilot stage for small vessels, while LNG and methanol are in use on ocean-going ships, an IMO spokesperson said.

South Korea’s DSME, one of the world’s biggest shipbuilders, plans to commercialize super-large container ships powered by ammonia by 2025, a spokesperson said.

CF is reconfiguring its Donaldsonville, Louisiana, plant to produce green ammonia. It plans to spend US$100 million initially to enable the plant to produce by 2023, about 18,000 tonnes. By 2026, production across its network could reach 450,000 tonnes, and 900,000 tonnes by 2028, Will said.

The hydrogen it will sell may have nearly 10 times the margin of ammonia fertilizer, according to CF, making the 75-year-old farm company’s newest product its most profitable.

Yara is developing a green ammonia project with power company Orsted in the Netherlands and also has green projects running in Australia and Norway.

Unlike CF, Yara is seeking government subsidies because green ammonia costs could be two to four times higher than conventional production, said Terje Knutsen, Yara’s head of farming solutions.

“The technology behind this is not mature enough today,” he said.

Yara, which aims to cut all CO2 emissions from its 500,000 tonnes-a-year Porsgrunn ammonia plant in Norway, wants funding from the Norwegian government to switch the plant’s production process to electricity by 2026.

Norway already supports hydrogen and green ammonia through a tax exemption on electricity used to produce hydrogen, Minister of Climate and Environment Sveinung Rotevatn said in an email.

“Hydrogen and hydrogen-based solutions, such as ammonia, will be important in reducing greenhouse gas emissions in the future,” Rotevatn said.

Global ammonia production would need to multiply five-fold if it is to replace all oil-based shipping fuel, Abbasov said. But given the abundance of nitrogen in the air, potential supply is almost unlimited if production costs drop, he said.

Nutrien is looking into green ammonia, but sees high costs and insufficient prices as major obstacles, CEO Chuck Magro said.

Industry efforts underway to produce small volumes of green ammonia are largely “window-dressing,” said Raef Sully, Nutrien’s executive vice-president for nitrogen.

“The reason (for Nutrien) to look at it is to position ourselves for when people are willing to pay,” Sully said.

“The problem is we’re just right at the start of development.”

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The consumption of oil for transportation is one of the top contributors to global greenhouse gas emissions that cause climate change, and fertilizer producers join a growing list of companies adjusting their business models to profit from a future lower-carbon economy.

By altering the production process for ammonia normally used for fertilizer, the companies told Reuters they can produce hydrogen for fuel or a form of carbon-free ammonia used either as a carrier for hydrogen or as a marine fuel to power cargo and even cruise ships.

The shift may improve their standing with environment-minded investors as fertilizer emissions attract greater government scrutiny in North America and Europe.

But the green fuels are not yet commercial and will require significant investment to turn a profit — a reality that has the world’s largest fertilizer producer, Canada’s Nutrien, staying out of the space for now. Oslo-based Yara is seeking government subsidies to proceed.

Still, renewable ammonia represents a six billion-euro (C$9.2 billion) opportunity for fertilizer producers by 2030, according to Citibank, based on 20 million tonnes of annual sales globally for clean power and shipping fuel compared with virtually none now. Global ammonia sales currently amount to 180 million tonnes.

“We absolutely could be known more for being a clean energy company than an ag supplier,” CF CEO Tony Will said in an interview, speaking of long-term prospects for the Illinois-based company.

‘Everybody is looking for solutions’

Fertilizer plants separate hydrogen from natural gas and combine it with nitrogen taken from the air to make ammonia, which farmers inject into soil to maximize crop growth.

Production generates carbon emissions that CF says it can avoid by extracting hydrogen instead from water charged with electricity. It can then combine that hydrogen with nitrogen to make green ammonia, which the marine industry is testing as fuel.

CF is in discussions about selling green ammonia to a Japanese power consortium including Mitsubishi Corp., but buyers will break most of it down to pure hydrogen for use in transportation sectors.

“This is a market that easily can exceed what the total ammonia (fertilizer) market is,” Will said. “We’re going to grow into that over the next 20-25 years.”

Adopting green ammonia or green hydrogen to replace crude oil-based fuel would help the International Maritime Organization (IMO) meet a target to reduce emissions, and is suited to both short- and long-haul vessels.

Methanol and liquefied natural gas (LNG) are other clean alternatives.

“Everybody is looking for solutions and I think the jury is still out,” said Tore Longva, alternative fuels expert at Oslo-based maritime advisor DNV GL. “Of all the fuels, (green ammonia) is probably the one that we are slightly more optimistic on, but it’s by no means a given.”

Ammonia remains toxic and corrosive, requiring special handling on ships, Longva said.

Furthermore, combusting ammonia may produce nitrous oxide, a greenhouse gas, that ships would need to neutralize to prevent emissions, said Faig Abbasov, shipping director for European Federation for Transport and Environment, an umbrella group of non-governmental organizations. Fuel cells are another potential marine use for ammonia and hydrogen.

Still, Abbasov sees ammonia and hydrogen as the greenest and most practical shipping fuel alternatives, and cheaper than methanol.

Development of ammonia and hydrogen for shipping fuel holds decarbonization potential but is at the pilot stage for small vessels, while LNG and methanol are in use on ocean-going ships, an IMO spokeswoman said.

South Korea’s Daewoo Shipbuilding + Marine Engineering , one of the world’s biggest shipbuilders, plans to commercialize super-large container ships powered by ammonia by 2025, a spokesman said.

The plans

CF is reconfiguring its Donaldsonville, Louisiana, plant to produce green ammonia. It plans to spend US$100 million initially to enable the plant to produce by 2023, about 18,000 tonnes. By 2026, production across its network could reach 450,000 tonnes, and 900,000 tonnes by 2028, Will said.

The hydrogen it will sell may have nearly 10 times the margin of ammonia fertilizer, according to CF, making the 75-year-old farm company’s newest product its most profitable.

Yara is developing a green ammonia project with power company Orsted in the Netherlands and also has green projects running in Australia and Norway.

Unlike CF, Yara is seeking government subsidies because green ammonia costs could be two to four times higher than conventional production, said Terje Knutsen, Yara’s head of farming solutions.

“The technology behind this is not mature enough today,” he said.

Yara, which aims to cut all CO2 emissions from its 500,000 tonnes-a-year Porsgrunn ammonia plant in Norway, wants funding from the Norwegian government to switch the plant’s production process to electricity by 2026.

Norway already supports hydrogen and green ammonia through a tax exemption on electricity used to produce hydrogen, Minister of Climate and Environment Sveinung Rotevatn said in an email.

“Hydrogen and hydrogen-based solutions, such as ammonia, will be important in reducing greenhouse gas emissions in the future,” Rotevatn said.

Global ammonia production would need to multiply five-fold if it is to replace all oil-based shipping fuel, Abbasov said. But given the abundance of nitrogen in the air, potential supply is almost unlimited if production costs drop, he said.

Nutrien is looking into green ammonia, but sees high costs and insufficient prices as major obstacles, CEO Chuck Magro said.

Industry efforts underway to produce small volumes of green ammonia are largely “window-dressing,” Raef Sully, Nutrien’s executive vice-president for nitrogen.

“The reason (for Nutrien) to look at it is to position ourselves for when people are willing to pay,” Sully said.

“The problem is we’re just right at the start of development.”

— Reporting for Reuters by Rod Nickel in Winnipeg and Victoria Klesty in Oslo; additional reporting by Jonathan Saul in London.

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