EuroChem announces plans to mothball European phosphate fertilizer plant in Lifosa, Lithuania, beginning in October 2023; company cites difficulty operating and accessing essential raw materials, putting majority of jobs at risk

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July 5, 2023 (press release) –

 

  • EuroChem says huge losses caused by state sanctions are unsustainable.
  • Lifosa intends to mothball operation from October with a significant number of jobs at risk if no viable solution is found.

Swiss-based EuroChem Group AG, one of the world’s leading fertilizer companies, today announced it will initiate a process to mothball its Lifosa operation in Lithuania due to the impact of sanctions which the company says has prevented normal and profitable operations.

The plant in Lifosa, one of the largest manufacturers of high-grade phosphate fertilizers in Europe, has been shut down since May for routine annual maintenance. Today the company’s owners EuroChem, confirmed that if a solution cannot be found which enables the plant to operate effectively with access to essential raw materials and its sales distribution network, it will be forced to start the process of mothballing the plant from October 2023, placing the majority of jobs at risk.

The decision follows more than a year of widespread supply-chain disruptions and shortages of raw materials since the company was sanctioned by the Lithuanian Government and placed under temporary administration.

The sanctions have caused Lifosa many millions of euro in lost revenues to date and a significant negative financial result for the first half of the year 2023, losses the company say are no longer sustainable.

Samir Brikho, Executive Chairman and CEO, EuroChem Group AG, said: “After careful deliberation, and with deep regret, EuroChem intends to start the process of mothballing the plant in Lithuania from October 2023.

“While the EU have stated that EuroChem is not sanctioned, we continue to experience the knock on effects of sanctions which have seriously impacted our European operations.”

“Under normal circumstances Lifosa is a financially healthy business running at full capacity, producing a wide variety of high-demand products for our customers around the world. However, the placing of Lifosa under sanctions and cutting off its sales and supply chain has created an impossible situation marked by critical raw material shortages, production stoppages, and lack of access to markets and finance.”

“Over the last 15 months, we have engaged in dialogue with the Lithuanian authorities to find a mutually satisfactory agreement that enables our business in Lifosa to continue operating efficiently, and within full compliance of EU sanctions. However, it is unsustainable for us to continue to run the business in this restrictive environment. As a responsible employer, we now have to take some critical decisions.”

Emiel De Brabander, a farmer from Belgian Flanders region, who uses fertilizers in his essential operations made an emotional appeal, “As a farmer, we are faced with enormous challenges every day, such as last year’s Ukraine crisis, which suddenly caused fertilizer prices to increase five or sixfold in a matter of weeks or months. Prices went from 170 euros per tonne to 1,000 euros per tonne. The big problem is, as a farmer we are a price taker, not a price giver.”

But while for farmers in developed countries fertilizers make up at maximum 20% of the cost of crop inputs, for farmers in developing countries this reaches 50% — subsequently the shortages and price hikes in fertilizer and grain supplies has hit the most vulnerable populations in the poorest countries the hardest.

“Thousands of farmers all over the world depend on producers like ourselves to supply them with fertilizers on time, and at the right price. The integrity of our supply chains and logistics networks is paramount. We are calling for Governments and policymakers to put policies in place which allow food production supply chains to operate freely, in order to avert the worsening crisis and achieve the UN Goal of eliminating hunger by 2030,” Samir Brikho, Executive Chairman, EuroChem.

The Lifosa plant located in Kedainiai, Lithuania, was acquired by EuroChem and saved from near bankruptcy in 2002. Since that time, the Swiss-based company has invested almost €300 million to transform the plant into one of the largest and most successful producers of fertilizers for agricultural crop production and animal nutrition products in Europe.

In various meetings and written communications, Lifosa petitioned Lithuania’s government and financial institutions to lift their restrictions on the company in full compliance with EU sanction regulations, to enable the business to continue to operate with full access to its critical supply chain and distribution network.

Marc Hechler, Chairman of Lifosa Board commented: “Lifosa’s business model depends on accessing global sales markets and sourcing the best-quality materials in closest proximity to its operations, at the lowest cost, including from EuroChem Group. For Lifosa’s future viability, it is imperative we resolve the sanction-related obstacles facing our raw material supply chain, so we can sell freely to all markets and receive payments from our customers.

“We have gone to great lengths to maintain operations and keep our employees at work despite the many production stoppages. But this is no way to run a business
that in prior years has been markedly successful.

“Maintaining Lifosa in current downtime mode costs several millions of euro per month and is uneconomic to sustain going forward. Although we will continue to work actively and diligently with the Lithuanian Government to find a solution, we are regrettably moving closer to mothballing in October.”

With no agreement in place with the Lithuanian authorities to restart operations in an economically viable way, EuroChem will now commence preparations to mothball the Lifosa plant following consultations with trade unions and relevant state authorities. The mothballing is expected to begin in October 2023, if no alternative solution can be found.

“Preparing mothballing and obtaining consents regarding mothballing takes time, which is why we are making this announcement today. Our thoughts are now clearly with our Lifosa employees. We will work with all relevant stakeholders to provide employees with the support they need during this challenging period.

“Our priority is also to safeguard the plant during mothballing. To that end, we will retain a number of employees with essential skills to keep both the plant and the surrounding environment safe and secure.

“At the same time and even at this late stage, we continue to look for solutions. We are also hopeful that there is an opportunity in the future to find possible investors acceptable to the Lithuanian Government that will enable Lifosa to restart operations,” said Samir Brikho, Executive Chairman and CEO, EuroChem Group AG.

About EuroChem

EuroChem Group AG is a leading global fertilizer producer and one of only three companies worldwide with manufacturing capacity in all three primary nutrient groups: nitrogen, phosphates and potash. Headquartered in Switzerland, EuroChem owns and operates mines and production facilities in Europe, South America, China, Kazakhstan and Russia. It employs more than 27,000 persons in 40 countries. Its widespread sales and distribution network covers more than 100 countries. EuroChem provides affordable, high-performance fertilizers
to farmers around the world. In 2021, EuroChem supplied more than 19 million tonnes of fertilizers – the equivalent of feeding approximately 250 million people. As the third largest fertilizer producer in the world, EuroChem makes a significant contribution to global food security.

About Lifosa

Lifosa is one of the largest producers of phosphate and complex fertilizer products in Europe. The plant is capable of producing more than 1 million tonnes per annum of mineral fertilizers, with more than 90 percent of Lifosa’s products exported to global markets. The company was founded in 1959 and acquired by EuroChem in 2002, who through significant investment turned the failing business into a world-class fertilizer production facility.

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