The European fertilizer crisis has widened as industrial giant YARA said record gas prices are forcing it to scale back its ammonia capacity in the region.

The energy crisis limiting fertilizer production is deepening as European producers again restrict operations due to rising prices for gas, a key raw material. More than a quarter of the region's nitrogen fertilizer production capacity is believed to have already been lost.

The cuts highlight the impact that the gas crisis in Europe is having on industrial users as well as consumers' electricity bills. Reduced fertilizer supplies also threaten to force the world's farmers to cut back on nutrients critical to growing crops, risking smaller crops as the world grapples with rising food prices.

YARA is cutting ammonia output to around 35% of capacity, with the latest cuts resulting in an overall reduction to the equivalent of 3.1 million tons of ammonia and 4 million tons of finished products across its production system in Europe. Gas is the basis for most nitrogen fertilizers, including ammonia.

“Yara will, where possible, use its global supply and production system to streamline operations and meet customer demand, including continuing to produce nitrates using imported ammonia whenever possible,” the Oslo-based company said in a statement.

Even before the latest cuts, Yara CRU Group estimated that 41% of Europe's ammonia production capacity outside of Ukraine would be shut down or run at a heavily reduced rate, based on recent announcements. According to CRU, it is currently much cheaper to import ammonia into Europe than to produce it there.

CF Industries announced on Wednesday that it would stop ammonia production at its remaining UK plant, while Grupa Azoty, Poland's largest chemical company, also cut ammonia production and Anwil, a division of oil company PKN Orlen SA, halted production.

The Lithuanian plant Achema, the largest producer of nitrogen fertilizers in the Baltic States, has warned that it will stop operations on September 1 due to rising gas prices and an unmanageable increase in production costs.

The company has not been operating at full capacity since last autumn. From September, it will leave only the production of soil and technical gas in operation.

Achema is the largest consumer of natural gas in Lithuania.

"Record prices for natural gas directly affect the cost of production, prices for our fertilizers become uncompetitive compared to products from Russia and the United States. In such a situation on the market, most Western fertilizer producers are forced to stop their plants, Achema is no exception," he said. general director Ramunas Miliauskas.

After the shutdown of the plant, part of the staff will service the equipment, while the rest of the workers will be sent to idle time.

In July, Swedbank provided Achema with a EUR 40 million loan to replenish working capital. Antanas Sagatauskas, head of the bank's business customer service department, noted at the time that the plant has a significant impact on the economy of the entire country, so it "needs to be helped to overcome the current market turbulence and provide a basis for sustainable growth in the future."

After the Lithuanian government decided in the spring to stop importing Russian gas, Achema buys it from Western markets.

Since last year, only one of the two workshops for the production of ammonium has been operating at the plant. Natural gas is the main raw material in the production of nitrogen fertilizers, its share in the cost is 70-80%.

According to the Lithuanian Social Insurance Fund, the plant employs 1,250 people.The Lithuanian plant Achema, the largest producer of nitrogen fertilizers in the Baltic States, has warned that it will stop operations on September 1 due to rising gas prices and an unmanageable increase in production costs.

The company has not been operating at full capacity since last autumn. From September, it will leave only the production of soil and technical gas in operation.

Achema is the largest consumer of natural gas in Lithuania.

"Record prices for natural gas directly affect the cost of production, prices for our fertilizers become uncompetitive compared to products from Russia and the United States. In such a situation on the market, most Western fertilizer producers are forced to stop their plants, Achema is no exception," he said. general director Ramunas Miliauskas.

After the shutdown of the plant, part of the staff will service the equipment, while the rest of the workers will be sent to idle time.

In July, Swedbank provided Achema with a EUR 40 million loan to replenish working capital. Antanas Sagatauskas, head of the bank's business customer service department, noted at the time that the plant has a significant impact on the economy of the entire country, so it "needs to be helped to overcome the current market turbulence and provide a basis for sustainable growth in the future."

After the Lithuanian government decided in the spring to stop importing Russian gas, Achema buys it from Western markets.

Since last year, only one of the two workshops for the production of ammonium has been operating at the plant. Natural gas is the main raw material in the production of nitrogen fertilizers, its share in the cost is 70-80%.

According to the Lithuanian Social Insurance Fund, the plant employs 1,250 people.

Poland’s biggest chemicals company, Grupa Azoty SA, has stopped making some of its key products such as nitrogen fertilizers and caprolactam, and trimmed output of ammonia because of record gas prices.

“The current situation on natural gas market that determines profitability of the production is exceptional, fully independent of the company and was not possible to predict earlier,” Grupa Azoty said in a statement Tuesday. It didn’t say how long the measures would last.

The state-controlled company had until now tried to avoid curtailing fertilizer production, even as European gas prices rose more than four fold this year due to reduced supplies from Russia, which triggered an energy crisis. Yara International ASA, Azoty’s larger peer, curbed production last month.

Grupa Azoty describes itself as the second-biggest producer of mineral fertilizers in the European Union. The company is among the largest buyers of natural gas in Poland, consuming more than 20 gigawatt hours of the fuel every year.