As natural gas prices continue to skyrocket, CF Fertilisers (CFF) - one of the UK’s largest fertiliser production companies - has announced that it will permanently close its Ince manufacturing facility near Chester.
US fertiliser group CF Industries revealed that the closure is due to a restructuring plan that will focus exclusively on manufacturing operations at its Billingham facility in Teesside.
Supplying fertiliser for farmers and CO2 for the food and drink industries, the company is a major player in the UK’s food supply chain, having been responsible for producing 60% of the country’s CO2.
Having worked with the UK Government on a three-month price-fixing support plan in September 2021, CFF was able to guarantee that critical industries such as food processing and nuclear power are ensured supplies of CO2 by maintaining operations at Billingham.
Following the deal’s expiration in January of this year, a new agreement signed between the two parties saw CFF’s Billingham plant continue to operate while global gas prices remained high, abating the immediate fears over CO2 shortages.
The permanent closure of the Ince plant – which hasn’t reopened since halting operations in September 2021 – and restructuring of its UK operations will likely see the loss of around 350 jobs.
An unprofitable venture
Due to the dependency of the global nitrogen industry on natural gas – the primary fuel source and raw material for ammonia production – global nitrogen industry conditions are expected to remain challenging for nitrogen producers in the UK and Europe, according to CFF.
Having seen its AN fertiliser sales volume to domestic customer plummet by nearly 30% since the 2017-18 season due to high competition from lower-cost imports, CFF turned to exporting at ‘unsustainably’ low margins to continue operations at both its facilities.
Anticipating higher carbon costs, CFF has stated that it intends to fulfil the current domestic demand for AN by limiting its production to the Billingham facility, which the company deems ‘best positioned’ for the longer term.
Commenting on the decision, Brett Nightingale, Managing Director, CFF UK, said, “Following a strategic review of our business, we believe that the best way to continue our legacy of serving customers in the UK is to operate only the Billingham manufacturing facility moving forward while addressing cost pressures throughout our business,” he added.
The company stated that Billingham had the capacity to produce enough fertiliser and other products to meet all forecast domestic customer demand.
Disruption to industry and future resilience
Last year’s CO2 supply concerns sparked fears over food and drink shortages. Some companies in the UK food and drinks industry said that they were reduced to just ten to 15 days of CO2 left, according to reports released in September 2021.
With CO2 used heavily in the meat industry for slaughter of pigs and poultry, Nick Allen, CEO, British Meat Processors Association (BMPA), told gasworld today that the closure of Ince is unlikely to affect the meat industry.
“We’re assured by CFI that there will be no disruption to CO2 supplies to the meat industry,” he said.
“However, the closure of one of only a handful of facilities in the UK means that future supplies will become somewhat less secure, particularly if something were to go wrong with the remaining plant at Billingham.”
“This plant closure means that we are becoming more dependent on individual points in the supply chain.”
How could the UK diversify its CO2 supply?
As part of the deal signed earlier this year between the Government and industry, plans were discussed to build long-term resilience to ensure protection of the UK’s CO2 supply.
Having one or two domestic sources for the UK based on ammonia or bioethanol is dangerous.
With the number of potential domestic CO2 sources dwindling, alternative sources could come from the biogas production process.
Economic opportunities are presented for industrial-grade CO2 from biogas plants for sectors such as welding, blasting services, and chemical feedstock, which makes up around 40% of all demands in many developed markets.
In times of season or price-induced shortage, biogas could alleviate some of the pressure felt in the CO2-intensive food and drink sector.
Earlier this year, BioCarbonics - one of the UK’s main suppliers of ‘green’ CO2 - stated that diversification of domestic sources could play a key role in reducing shortages.
”Having one or two domestic sources for the UK based on ammonia or bioethanol is dangerous.”
”Both of these industries have become volatile over the past 10 years, and have led to numerous supply shortages across the globe and this will not get any better going forward.”
“BioCarbonics believes that the development of networks of small CO2 sources is a stronger supply model than relying on one or two large plants for supply. This ‘distributed’ model is inherently more reliable, and we are building our business and customer base based on this strength, not based on a voltatile underlying industry,” the statement concluded.