Our future
We take comprehensive and wide-ranging measures to drive our Group’s further growth and maintain its market position.
We take comprehensive and wide-ranging measures to drive our Group’s further growth and maintain its market position. As a major European organisation with multiple business pursuits, we are aware of the numerous challenges which the fast changing world will bring in the future. Although the pandemic proved that not everything can be foreseen, at the Grupa Azoty Group we carefully analyse trends, study changes in the areas where we operate, and monitor stakeholders’ expectations. Although not everything is within our control, like for instance raw material prices, our Strategy 2030 prepares us for various scenarios and provides a solid platform for building the future of our Group and our readiness to address key challenges of the contemporary world.
Agriculture is naturally one of the areas of greatest interest for the Grupa Azoty Group. Currently, food for nearly half of the world’s population is produced using mineral fertilizers.1 The expected population growth must translate into an increase in food production, without, however, increasing the size of arable areas. It is estimated that as much as 90% on the increase in agricultural production will come from agricultural intensification on the existing arable land.2 More efficient use of fertilizers combined with preservation of biodiversity is a critical factor in this context. To this approach, very much in the spirit of EU law, we have already responded, and thanks to our Strategy we will embrace it even more in the future.
1 https://ourworldindata.org/how-many-people-does-synthetic-fertilizer-feed
2 https://www.fao.org/fileadmin/templates/wsfs/docs/Issues_papers/HLEF2050_Global_Agriculture.pdf
Our response to challenges facing the agricultural sector:
- precise fertilizer application and helping farmers and agricultural producers to achieve better efficiency thanks to satellite technology and artificial intelligence,
- environmentally-friendly Fosfarm fertilizers aligned with the objectives of the EU’s Farm to Fork strategy,
- humic acid plant contributing to sustainable agriculture,
- ‘Grounded in Knowledge’ soil testing programme run in cooperation with accredited Laboratories of Regional Chemical and Agricultural Stations,
- our experts provide agronomic advice, including advice on fertilization.
In line with the 2030 Strategy, we plan to expand our product portfolio by adding:
- new formulae of liquid products, including potassium and microelements among other nutrients,
- granulated fertilizers with nitrification inhibitors and microelements, and mineral-organic fertilizers,
- calcium fertilizers,
- line of products for organic farming,
- other new products, including soil conditioners, nitrification inhibitors,
- fertilizers based on beneficial microorganisms.
We are aware that our products support food security both in Poland and in many other countries across the globe. For this reason, in 2020 and 2021 – despite high costs of raw materials and the need to properly protect its employees against the pandemic – the Grupa Azoty Group was one of the few chemical manufacturers that did not discontinue their production activities. In 2021, decisions to scale down or suspend operations were made by leading manufacturers, including companies from Germany, Norway, Lithuania, Spain and the Netherlands. The continuity of our operations ensured uninterrupted production of food by our customers, i.e. farmers and agricultural producers.
BEST PRACTICE
As in the previous year, our activities in 2021 continued to be impacted by the COVID pandemic. We were taking appropriate measures to protect our employees ever since the state of epidemic had been declared in Poland back in 2020. We set up a task team for minimising the risk of a coronavirus spread and a crisis management team. All instances of COVID infections among our employees were investigated. We also developed detailed instructions on how to behave safely in the pandemic situation, including how to apply disinfectants and hand sanitizers, use common space and give over duties in a shift-work system. Where required, we used ozone treatments and installed flow UV lamps. We have limited face-to-face contacts by offering our office staff an option to work from home. All recommendations and procedures were communicated to employees when needed, in a newsletter and over the intranet.
According to the ‘Polish rural areas and agriculture’ survey,3 commissioned by the Ministry of Agriculture and certain other entities, in 2020 farm owners spent on average 22% of their direct payments to purchase fertilizers. At the Grupa Azoty Group, we are aware of the immense role EU funds play and will continue to play in terms of driving demand in the Polish agricultural sector. For this reason, we closely monitor trends in EU funding. According to the Agency for Restructuring and Modernisation of Agriculture, in 2021 applications for direct payments were submitted by approximately 1.3 million farmers and the allocated financial envelope was PLN 15.63 billion, while the entire budget for area payments in 2021 exceeded PLN 3 billion. Advance payments for direct payments were disbursed until November 30th 2021 – 1.21 million farmers received direct payments of approximately PLN 9.88 billion, and more than 858 thousand farms were given PLN 2.21 billion in RDP area payments. Final payments started to be made on December 1st 2021.4
We seek to ensure compliance of our agricultural products with new regulations. We help farmers comply with the statutory ban on using granulated urea as a fertilizer (except for urea containing a urease inhibitor or biodegradable coating), which was introduced in Poland on August 1st 2021. The regulations contribute to protecting air quality and reducing ammonia emissions. We responded by adding to our portfolio Pulrea +INu, i.e. urea with an addition of urease inhibitor increasing the absorption of nitrogen from the fertilizer. Pulrea +INu is fully compliant with the new regulations.
We also comply with Regulation (EU) 2019/1009 of the European Parliament and of the Council laying down rules on the making available on the market of EU fertilising products. Most of the provisions of this Regulation will be effective as of July 16th 2022. The new regulations provide for:
- sustainable and ‘greener’ agriculture,
- resource-efficient use of nutrients in line with the Circular Economy,
- harmonisation of standards for fertilizers made from organic or secondary raw materials in the EU,
- regulating the rules for the placing on the market of all products with a fertilizer value that meet the quality requirements laid down in the Regulation and are environmentally friendly and safe.
3 https://www.gov.pl/attachment/1b8b386b-f998-4314-aaa1-fbde8ed3c105
4 https://www.gov.pl/web/arimr/doplaty-za-2021-r-ponad-17-mld-zl-na-kontach-rolnikow
Once the Regulation enters into force, the classification of fertilizers will be changed from EC to CE. CE marked fertilizer products are subject to conformity assessment procedures carried out, among others, by certified bodies. The new classification also means more information provided on fertilizer packaging. In addition to general information, the following details are also displayed on the label:
See what changes will be brought in by regulation 2019/1009 for manufacturers
In 2021, the Grupa Azoty Group continued to bring its products into compliance with the Regulation.
Reducing the environmental footprint remains one of the major challenges facing the Group. Although for years we have consistently implemented successful initiatives to mitigate the adverse environmental impact of our production processes, we are well aware that there is still a long way to go. Our internal conviction of the need to protect the natural environment corresponds to regulatory changes that have already been introduced or are proposed to be enacted. One of the key documents in this respect is the EU Commission’s Fit for 55,adopted in July 2021 as part of the European Green Deal to strengthen the position of the EU as a global climate leader. The purpose is to update existing EU legislation with the aim of ensuring that EU policies are in line with the climate goals for 2030. This will help bring about transformative changes needed in the economy, society and industry to achieve climate neutrality by 2050 and to reduce net greenhouse gas emissions by at least 55% compared with 1990 by 2030.
The package includes:
- changes in the Emissions Trading System (EU ETS),
- Effort Sharing Regulation,
- Renewable Energy Directive,
- Energy Efficiency Directive,
- new mechanism for adjusting prices at borders to take account of CO2 emissions.
Due to the ongoing climate change, the Grupa Azoty Group is aware that in the coming years the chemical industry is likely to be under strong regulatory and science-backed pressure to decarbonise. The pressure on emissions reporting will also grow.
What we already do:
- we implement solutions to reduce pollutant emissions,
- we constantly monitor our carbon footprint and report it on a regular basis,
- we adopt solutions supporting the circular economy,
- our AdBlue product helps reduce emissions of nitrogen oxides from vehicles with diesel engines,
- we are building Polimery Police – CEE’s first company to offer fully biodegradable plastics.
Our plans in line with the 2030 Strategy:
- ‘Green Azoty’ and the numerous related strategic projects,
- diversification of energy sources, followed by gradual phase-out of coal in favour of natural gas and renewables as alternative green sources in order to reduce the organisation’s carbon footprint,
- maximising synergies between energy generation and chemical processes, e.g. in the area of energy generation from steam created by chemical units,
- reduction of unit energy consumption rates, including 30% reduction of energy intensity of the SMR process by 2024,
- deployment of new technological solutions, including the use of new types of equipment with enhanced energy efficiency profiles, increase of energy yields, and use of smart control techniques (APC, DCS),
- aligning the Group companies’ energy installations with the BAT conclusions through flue gas denitrification and desulfurisation, research into SCR catalysts for the energy generation industry in Poland.
Increased ambition of the European Union’s climate and energy targets
Fertilizer production involves the consumption of large volumes of natural gas. Its price is the key factor behind the price competitiveness of fertilizer products. 2021 saw a several-fold increase in the price of gas at European hubs relative to the end of 2020, reaching its highest level since 2008. At the end of December 2021, the price of gas for delivery in January on the Dutch TTF exchange, a benchmark for most contracts concluded in Western Europe, exceeded EUR 180/MWh, i.e. was 10 times higher than the year before. Similarly, on December 22nd the price of gas on the Polish Power Exchange hit a record level of PLN 828.64/MWh, while in early 2021 it approximated PLN 91/MWh.
The pandemic-induced crisis on the global energy commodity market, which surfaced in 2021, was further aggravated following Russia’s invasion of Ukraine in February 2022. In response to the challenges and disturbances on the global energy market, the European Commission presented its REPowerEU plan for saving energy, producing energy from renewables and diversifying its supplies.
Fertilizer production costs in the EU are driven by additional regulations, including limits on CO2 emissions. The prices of CO2 emission allowances skyrocketed in November 2020 as soon as the effectiveness of COVID-19 vaccines was confirmed and lockdowns in Europe were gradually lifted. This strong upward trend helped in particular to alleviate the effects of depressed demand amid ultra-loose monetary policy of central banks in the United States and Europe. Since November 2020, the prices have risen by approximately 240%.5
All this is dampening the price competitiveness of chemical products made in the European Union and increasing the volume of fertilizer imports.
Our response to market challenges:
- we have joined the discussion on the EU CBAM, which is putting a carbon price on certain goods imported from outside the European Union that is based on CO2 emissions – we have presented our proposals to the European Commission,
- we enter into long-term contracts for the supply of energy commodities with reliable and proven suppliers.
Our plans in line with the 2030 Strategy:
- ensuring the continuity and security of supplies based on our raw materials strategy,
- ‘Green Azoty’ and the numerous related strategic projects, including energy diversification and green energy projects.
