Norwegian Fertilizer Giant Yara Cuts More Ammonia Production in Europe as Gas Costs Spiral

Norwegian fertilizer group Yara International, one of the world's largest producers of nitrogen fertilizers, has stepped up production cuts at its European ammonia plants as surging natural gas prices make output in the region unprofitable. When it published its third quarter 2026 results on 22 October, the company disclosed that, as of 16 October, its curtailments were running at a rate of 270,000 tonnes of ammonia and 140,000 tonnes of finished fertilizer products per quarter.

This is a sharp escalation compared with the third quarter, during which Yara reduced output by 150,000 tonnes of ammonia and 115,000 tonnes of finished products. Most of that reduction took place at its plant in Ferrara, in northern Italy, and the group's ammonia production for the year to date is now 11% lower than in 2025. Trade reports published after the results call indicated that curtailments may now be in place at four of Yara's ammonia plants in Europe. Chief executive Svein Tore Holsether told Reuters that the cuts are currently deeper than in the third quarter because gas price increases have accelerated since the start of the fourth quarter.

Natural gas plays a double role in nitrogen fertilizer production. It is the main raw material used to make ammonia and also a major source of energy for the process, so any jump in gas prices quickly raises the cost of every tonne produced. Ammonia is the building block for most nitrogen fertilizers, such as urea and nitrates, and it is also used in industrial products like diesel exhaust fluid. Ahead of its results, Yara had already indicated that making ammonia in Europe had become loss-making at current gas prices, while turning ammonia into higher value products such as nitrates and urea remained profitable. This explains why the company is cutting ammonia output first and importing ammonia to keep its downstream fertilizer lines running.

The scale of the cost shock has grown quickly. Based on current forward prices, Yara now expects its gas bill to be $450 million higher in the fourth quarter of 2026 than a year earlier, and $445 million higher in the first quarter of 2027. In July, the company had guided for an increase of only $115 million for the fourth quarter, which shows how fast the energy situation has deteriorated over the past three months. In the third quarter, higher energy costs had already reduced earnings by about $165 million compared with the same period of 2025, with European gas averaging $16.3 per MMBtu.

The European gas market has tightened steadily since the summer. The benchmark Dutch TTF contract averaged less than 45 euros per megawatt hour in June, climbed above 80 euros in September for the first time in three years and topped 90 euros on 20 October, according to trade reports. In mid-September, European gas storage sites were only 68.5% full, against 80.6% a year earlier, leaving the region exposed going into the heating season. The planned European Union ban on Russian LNG imports from 1 January 2027 adds further uncertainty for industrial gas users.

The squeeze on European producers comes as the conflict in the Middle East continues to disrupt global fertilizer trade. About a third of global fertilizer flows normally pass through the Strait of Hormuz, which has suffered major disruption since the war began. European ammonia imports had already fallen 42% year on year in the first quarter of 2026 because of the crisis. Yara noted that the coming northern hemisphere season will be the first full season with reduced supply from the Middle East, and the UN Food and Agriculture Organization expects global food inflation to accelerate and persist well into 2027 due to shipping disruptions and higher fertilizer costs.

The higher gas costs weighed heavily on Yara's quarterly figures. Third quarter EBITDA excluding special items fell to $675 million from $804 million a year earlier, about 10% below the $752 million expected by analysts. Net income dropped to $199 million from $320 million. The European segment was hit hardest, with EBITDA down 62% to $73 million, as higher feedstock costs more than offset higher selling prices and an unplanned outage hurt the phosphate business in Finland. Total deliveries were 4% lower than a year earlier, although European deliveries rose 2% thanks to a pick-up in buying at the end of the quarter, leaving Yara with a European order book stronger than usual for this time of year.

Plant reliability problems have added to the pressure on volumes. Yara's Pilbara ammonia plant in Australia, with a capacity of 850,000 tonnes per year, was taken offline in late March after damage caused by a power outage. In France, the 400,000 tonne per year Le Havre ammonia and urea plant was briefly shut down by a technical incident in May, and trade reports published on 20 October indicated that the site had once again been shut down and restarted.

To limit the impact on customers, Yara is relying on its global production network and its ammonia trading and shipping system, replacing unprofitable European output with ammonia sourced from other regions. Holsether said the company could buy more ammonia abroad if high prices persist in Europe. In the longer term, Yara is reducing its dependence on European gas through the acquisition of the Gulf Coast Ammonia plant in Texas, announced in July 2026 for about $1.3 billion. Once the deal closes, the group expects to have roughly equal exposure to European and US gas prices, but completion remains subject to regulatory approvals.

The outlook for nitrogen supply remains tight. Demand for the 2027 season has been slow so far across Europe, the United States and Latin America, which means that a large share of seasonal purchasing still has to be done as the Chinese export window closes. With European ammonia output curtailed, Middle East supply constrained and shipping through Hormuz disrupted, buyers face limited availability and elevated prices ahead of the spring application season. Europe is also becoming more dependent on imported ammonia, which adds freight costs and exposes supply to further shipping disruptions. The size of Yara's curtailments will depend on how gas prices evolve over the winter, and the situation remains active.