Nitrofert, Estonia's largest fertilizer producer and a driving force in the nation's chemical industry, fired 400 out of 480 workers due to low carbamide prices on the world market and a termination of a major gas supply contract.
According to Nitrofert management, a set of coincidences led to the lay-off. First, the price for carbamide on the world market stayed low, and second, analysts have predicted that ammoniac prices will also plummet.
To make things worse, Mezregiongaz, Nitrofert's natural gas supplier from Russia that was supposed to provide Nitrofert with cheap gas until the end of the year, pulled out of the supply contract.
"The owners carefully considered all the possible developments," said Viktor Melnik, Nitrofert's managing director, adding that Mezregiongaz's act has proven fatal for the company.
"Gazprom still has not responded to our business proposals, and the natural gas from Itera is too expensive for us," Melnik said.
Additional losses come from an EU anti-dumping fine, 11.45 euros per ton for carbamide, the main product Nitrofert sells to Western Europe.
Until recently the owners of Nitrofert subsidized production of carbamide and ammoniac, and losses have grown steadily.
"We have finished the planned capital renovation of the plant and are now preparing for the winter so the equipment does not freeze," said Melnik.
"Announcing the lay-off was hard because it is difficult to find a job in the region, but it is the only correct action in order to save the company from bankruptcy," he said.
Nitrofert is searching for a strategic investor who would help find cheaper natural gas, the main source material for the plant. In addition, the company has applied to the Economy Ministry for a 5 million kroon cash injection.
The money would maintain the plant during the winter until an investor is found.
Melnik named Russia's Gazprom and Itera Group as possible strategic investors.
Nitrofert is one of the largest employers in the problem-ridden northeastern part of the country. The 400 person lay-off will make the unemployment in the area even more drastic, the labor market department stated last week.