Why SKW Piesteritz Is So Important to Europe's Energy Supply

Why is ammonia, of all things, so important?

For farmers, ammonia is particularly important because it is used to produce mineral nitrogen fertilizers. These ensure that plants receive sufficient nutrients and enable high yields.

During his visit, Federal Minister of Agriculture Rainer also emphasized the importance of domestic fertilizer production. “Without fertilizers, it would be very, very difficult when it comes to our food supply,” said the CSU politician. Germany needs “a stable supply of fertilizers.”

Precisely because ammonia is used in so many sectors, its production is no longer considered solely a matter for the chemical industry, but increasingly also for economic, agricultural, and security policy.

Why is production in Europe coming under pressure?

The main reason is natural gas.

It is needed in the production of ammonia not only as an energy source but also as a raw material. “Production is particularly energy-intensive because nitrogen is very unreactive and can only be combined with hydrogen under extremely high pressures and at several hundred degrees Celsius,” explains SKW Piesteritz.

When gas prices rise, production costs therefore increase immediately. The industry felt the impact of this acutely after Russia launched its war of aggression against Ukraine.

What role do current crises play?

It’s no longer just about energy prices.

The recent tensions in the Middle East and the at times unstable situation around the Strait of Hormuz have once again shown how vulnerable international supply chains can be. According to the German Agricultural Industry Association, about one-third of the global urea trade passes through the strait. Even the uncertainty over potential supply disruptions has recently caused prices to rise significantly.

Why does Europe want to maintain domestic production?

The European Commission views growing dependence on imports with concern. About 30 percent of the EU’s nitrogen fertilizer needs are already met by imports. At the same time, European production capacity for ammonia has fallen by nearly 10 percent in recent years.

With its action plan, the EU therefore aims to strengthen domestic fertilizer production, ease the burden on farmers, and secure supply in the long term. From the Commission’s perspective, recent crises have shown just how dependent Europe is on functioning supply chains and imports.

The debate has now also reached the realm of climate policy. The European Commission wants to ease the burden on energy-intensive industries as they transition to climate-friendly practices. EU Commission President Ursula von der Leyen spoke of an “investment and independence plan” designed to strengthen European industry while simultaneously advancing decarbonization.

The Agrar industry association also emphasizes the importance of domestic production capacity. “Efficient domestic fertilizer production is a key component of supply security and the resilience of agriculture in Germany and Europe,” the association explains.

Why is Piesteritz a particular focus here?

According to the company, SKW Piesteritz is Germany’s largest producer of ammonia and urea. Short transport routes are an advantage, especially during the fertilizer season. “A ship from China, Africa, or Russia simply takes longer than a truck or train from Piesteritz,” the company argues.

Economically, however, the situation remains tense. According to SKW, the competitive disadvantages faced by European manufacturers persist. At the same time, the company is seeing initial positive signs, such as tariffs on certain imports and the elimination of the gas storage surcharge. The parent company, Agrofert, is nevertheless sticking to its growth course, recently consolidated its European nitrogen operations, and continues to invest in the Piesteritz site.

Why does this also affect consumers?

At first glance, it seems to be just about a chemical plant in Saxony-Anhalt. In fact, the debate touches on much broader questions: Can Europe produce important raw materials on its own, or will it become more dependent on imports? And how can agriculture and industry be reliably supplied, even in times of crisis?

The discussion surrounding SKW Piesteritz thus exemplifies why Europe no longer views its fertilizer production merely as an economic issue, but as part of its supply and food security.

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