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After several years of low gas prices, happiness turned to Yara.
In 2016, E24 wrote that the fertilizer giant had saved billions of dollars because of a significant drop in the price of gasoline, but now prices are rising again quick.
Thus, Yara's gas bills are also increasing.
In the first three quarters of the year, the company's gas costs increased by $ 229 million ($ 1.88 billion), according to figures released Thursday by the company.
The company expects a further rise in gasoline costs in the fourth quarter. In addition, CO₂ prices are on the rise and the EU will tighten its quota system. This can possibly contribute to threatening the profitability of European industrial companies.
"As a Norwegian taxpayer, you look forward to it, but as an industrialist in Europe, you worry about both the price of gas which is very high, but also for the price of CO₂ , which will gradually turn to industrial companies, "says Petter Østbø, Chief Financial Officer, Yara at E24.
Read more: Yara weaker than expected
– A real threat of slowdown
Last year, the European climate policy seems to have begun to work seriously. CO₂ emission quotas have gone from seven euros per tonne to around 20 euros per tonne and sometimes even more.
However, if the development of expensive gas continues and fewer quotas are available in the EU quota system, this could threaten some of Yara's European factories.
"Many of our facilities in Europe pose a real threat of economic slowdown," said Østbø.
"We are based on the facts, we adapt and then we will see what happens," he says.
European gas price:
Thus, European gas prices have evolved in recent years, measured at prices in Zeebrugge:
2013: 10.6 USD per MBtu (millions of British thermal units)
2014: $ 8.1 per MBtu
2015: 6.4 dollars per MBtu
2016: $ 4.5 per MBtu
2017: $ 5.7 per MBtu
First July 9, 2018: $ 7.8 per MBtu
Source: Yara's Annual Report for 2017, Yara's report for the third quarter of 2018.
– Is there also a risk for Norwegian plants or is it elsewhere in Europe if gas prices remain high?
"We have different types of facilities, some run on gas and some do not," said Østbø.
The Yara facilities in Glomfjord are not exposed to gas, but it is the ammonia plant in Porsgrunn.
"If there is something that will bring down the price of gas in Norway, then it's the ammonia plant in Porsgrunn. But it must be emphasized that our production there is at efficient and competitive – always with high gas prices, as we have seen now, says Østbø
Read more: Yara serves the migraine of the energy industry
– plays uphill
Yara is one of the largest industrial gas consumers in Europe.
Østbø points out that he and Yara are in favor of climate action, but stresses that the fact that European companies have higher costs than competitors elsewhere in the world is a challenge.
"I will not complain about the politics of Europe, but I might want that the United States, China, Africa and so on," too, " did he declare.
"We play a bit upstream," he says.
Asia promises LNG prices
Gas prices were mainly driven by the tightening of the global market for liquefied natural gas (LNG). One of the reasons is China's environmental policy, which has led to increased use of LNG.
"What happened now is that Japan because of nuclear power plants, Korea also because of this, plus China partly because of environmental policy has taken a lot of LNG.They have taken so much that they have raised prices in Europe, says Østbø.
However, gas prices in Europe could fall further because, according to Østbø, 70 billion cubic meters of LNG will be marketed in the next 12 to 18 months. This corresponds to more than half of Norway's annual gas production.
"There is talk that Asia is sucking all that in. They do not, it happens in Europe, then the price of gasoline will temporarily drop again," he says.
INCREASE IN COSTS: Yara's fuel costs are rising sharply. Figures are in millions of dollars and apply to gas costs in Europe and the United States. Figures for the fourth and first quarter are estimates.
"style =" width: 100%; "aria-decriteby =" figcaption # 24469308 "/> INCREASE IN COSTS: Yara's fuel costs are rising sharply. Figures are in millions of dollars and apply to gas costs in Europe and the United States. Figures for the fourth and first quarter are estimates.
Three billion more expensive
An average increase in European gas prices of just one dollar per MBtu will reduce Yara's annual operating profit (ebitda) by just over $ 160 million, according to the sensitivity analyzes published on the website from Yara.
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The company assumes that gas costs will increase further and in the fourth quarter it will have to spend $ 125 million more than the fourth quarter of last year.
"It sounds a bit," says Østbø.
In total, Yara's additional gas bill will rise to $ 354 million ($ 2.9 billion) in 2018, according to the company's quarterly submission figures.
The price of gas in Europe rose to over 10 dollars per million British heating systems (MMBtu) in 2013, but fell to a level below 5 dollars in 2016. The following year it has increased again.
In the third quarter of 2018, Yara had to spend $ 8.2 per million BTUs of gasoline in Europe, compared to $ 5.7 per million BTUs in the same quarter of the previous year.
"Obviously, it would have been more fun to be in the United States, where there are three dollars for gas," says Østbø.
In the first nine months of the year, Yara paid $ 8 per million British heaters (MMBtu) for gas in Europe, compared to $ 5.9 per million BTUs for the same period last year .
Read more: Rising prices of gasoline strikes Yara: – Has been a strain
Can move production
According to Østbø, the current technology of fertilizer production and the distinctive costs in Europe make it less tempting to increase the extra capacity here.
"If you get a CO₂ price on a car, you can swap a car, more or less, but you can not change the factory or move it around." Porsgrunn, for example, dates back to the 1920s. to move, that makes no sense, says Østbø.
"All we can do is go to bed, and if you build new ones, it will be in a region without CO₂ charges," says the CFO.
Yara buys about 4.5 billion cubic meters of natural gas annually in Europe. In comparison, Norway exports 117 billion cubic meters of gas to Europe.
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