Supplies of CO2 gas critical to the food sector are again in the balance after the UK’s leading supplier of the feedstock announced plans to halt production, citing “market conditions”.
In a statement published on Wednesday (24 August), CF Fertilisers UK said it intended to temporarily end ammonia production at its remaining UK plant in Billingham on Teesside, due to it being “uneconomical” against the current energy landscape.
The company – a subsidiary of US-based chemical giant CF Industries – manufactures CO2 gas at the plant as a byproduct of the site’s main ammonia production process.
It is then used widely across the food sector in areas such as in modified atmosphere packaging for products including fresh meat and salads; in soft drinks and beers; and across the pig and poultry processors in slaughtering.
CF said it had “not yet determined” the exact date when it would begin the temporary shutdown of the plant.
But the announcement has sent shockwaves across the food sector, prompting fears it could lead to food shortages – with the British Meat Processors Association warning the loss of gas from Billingham “would take out the bulk of the UK’s remaining CO2 gas supply”. Reports overnight suggested it could end production within the next four weeks.
Given current traded natural gas prices were “twice as high” as they were a year ago, the company’s UK ammonia production was now “uneconomical, with marginal costs above £2,000 per tonne and global ammonia prices at about half that level”, CF said.
Its move is the latest instalment in an increasingly regular and disruptive series of CO2 gas supply crises that have plagued the food sector over the past four years.
It started in the summer of 2018 when the combination of fires at plants, maintenance and breakdowns led to severe shortages of the gas across the food and drink sector, affecting the availability of a raft of items from crumpets to soft drinks, beer and chicken.
A new crisis driven by rising energy prices in September 2021 left the food sector again mired in uncertainty, until a supposedly long-term deal was struck with CF to continue gas supply from Billingham in February of this year.
CF then prompted further fears over supply in June when it closed its Ince site Cheshire, meaning the UK was already vulnerable “to anything going wrong” at Billingham and would be “heavily reliant” on increasingly scarce overseas gas supply to “make up the shortfall”, suggested BMPA CEO Nick Allen.
And since then, ammonia producers in Italy and Germany have cut production, sending “European food and drink companies scrambling to secure tightening supplies of the gas at the end of July”, he added.
Explainer: How important is CO2 gas to the food sector?
“Whilst we are in a much better position now than we were a year ago, if CF Industries follows through on its threat to close Billingham the British meat industry will have serious concerns,” Allen warned.
“Without sufficient CO2 supplies the UK will potentially face an animal welfare issue with a mounting number of pigs and poultry unable to be sent for processing.”
Defra said it was “disappointing” CF had decided to halt ammonia production Billingham. “However, since last autumn the CO2 market’s resilience has improved, with additional imports, further production from existing sources such as anaerobic digestion and bioethanol, and better stockpiles,” suggested a spokeswoman.
As the government engaged with businesses over potential impacts and continued to examine options “for the market to improve resilience over the longer term”, she urged industry “to do anything it can to meet demand, which is in the best interest of businesses and the public”.
However, Nick Allen stressed there was now a need for more direct intervention.
“We can’t see how government can sit on the sidelines and insist that it’s for companies to work it out amongst themselves,” he urged. “They are going to need to step in.”
Longer-term interventions that would help the CO2 market become “more resilient and stable” were now “both necessary and overdue”, agreed British Soft Drinks Association director general Gavin Partington.
Meanwhile, the British Beer and Pub Association’s CEO Emma McClarkin said the timing of the news “could not be worse as our pubs and brewers are already dealing with severe headwinds and pressures on their supply chains”.
CF’s announcement was “extremely worrying and a sign of the pressure the fertiliser and energy markets are under”, said NFU president Minette Batters.
“We will be monitoring any impact this decision has on the immediate fertiliser market and we will be meeting with CF Fertilisers to understand what this suspension means for future fertiliser orders and how long this temporary halting of production is anticipated to last for,” she added.
“The NFU will continue to engage with the government on action to improve the resilience and transparency of the fertiliser market, which is crucial to maintaining and enhancing our domestic food production. I am also urging the government to review how this decision impacts CO2 availability in the UK, which is essential in the food supply chain to process and package food.”
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