The UK could see industry blighted once again by persistent carbon dioxide (CO2) shortages following imminent cessation of the Government’s support plans agreed upon with CF Industries (CFI) in September last year (2021).
The plans, due to expire at the end of January (2022), were part of a three-month price-fixing agreement put together by the UK CO2 industry and the Government to ensure UK business has access to a sustainable supply of CO2 following the closure of two major CO2 production facilities.
CFI’s subsidiary CF Fertilisers (CFF) produces 60% of the UK’s CO2 from its two plants in northern England, which closed last year due to the spike in natural gas prices causing nationwide CO2 concerns.
The company has provided gasworld with a statement revealing that it is is continuing to negotiate with its industrial gas customers to extend CO2 offtake and pricing agreements.
With CO2 used across a range of industries including soft drinks, animal slaughter, food packaging, and for transport and storage of vaccines, a shortage could have a major impact on food availability in UK supermarkets.
The deal struck last year between CFF and the UK Government stipulated critical industries such as food processing and nuclear power are ensured supplies of CO2.
At the time, Business Secretary Kwasi Kwarteng said of the deal, “Today’s agreement means that critical industries can have confidence in their supplies of CO2 over the coming months without further taxpayer support.”
“The government acted quickly to provide CF Fertilisers with the support it needed to kick-start production and give us enough breathing space to agree a longer-term, more sustainable solution.”
As Government intervention nears its end, concerns have been expressed by major players in the UK food and beverage industry, primarily over the meat and beer sectors.
Speaking on BBC’s Today Programme this morning (26th January), Nick Allen, CEO, British Meat Processors Association (BMPA) said that there will be a ‘tremendous impact’ through the brewery industry and the soft drinks industry.
”Prices will have to go up considerably.”
“If a deal isn’t struck between CF Industries and the suppliers, then somewhere there’s going to be some problems. Prices will have to go up considerably,” he stated.
Allen also said that the Government has stepped in to ensure the meat sector will be prioritised due to animal welfare issues.
He added that although the Government intervention was useful and the company is in a ‘much better place’ than it was three months ago, the current energy price crisis lends a certain degree of uncertainty.
This was echoed in a statement provided to gasworld from the Food and Drink Federation (FDF), which emphasised the need for industry and the Government to continue its collaboration.
“Last year’s Government intervention which guaranteed CF Industries production of CO2 until the end of this month was very welcome,” a spokesperson said.
“…there will be further CO2 shortages once again.”
“But we are concerned that with just days now remaining before that agreement comes to an end, and energy prices still very high, there will be further CO2 shortages once again.”
The added pressure caused by high prices is likely to lead to shortages in the products found on supermarket shelves and could impact families already struggling with high food-price inflation.
According to the FDF, the organisation aims to work together with the Government to help build ‘long-term resilience’ into the production of food-grade CO2.
Further reaction from industry
The ongoing uncertainty of energy prices and CO2 availability could be a catalyst for companies to search for alternative solutions to help reduce supply concerns, a route pursued by dry ice manufacturer Dry Ice Scotland.
Ed Nimmons, Co-Founder of Dry Ice Scotland, told gasworld that although the supply disruption will no doubt have a ‘profound impact’ nationwide, it’s likely to be a short-term issue.
“Like others, Dry Ice Scotland has been putting energy into securing long term, sustainable sources of domestic CO2 to mitigate future impacts, and I can say that in a year or two the UK will be well positioned to deal with the full demand of the market,” he added.
Major industrial gas supplier Nippon Gases has been in touch with gasworld regarding further details of CO2 supply in the UK. The company is currently working on the matter and will provide more information as it emerges.
An open letter addressed to Kwasi Kwarteng and Secretary of State for Environment, Food and Rural Affairs George Eustice from representatives of the UK food and drink industry is scheduled for release later today.
One of the UK’s main suppliers of ‘green’ CO2 from biogas sources, BioCarbonics Ltd (BioCarbonics), has also expressed concerns regarding the potential for a supply shortage if the deal between CFI and the CO2 suppliers falls apart and CFI discontinues the production of ammona and/or CO2 at the site.
As a solution, the company suggested, “They will either have to source product from their competitors, or transport it across the channel from the continent.”
“In both cases, this most likely means continued high prices for CO2 and a fragile supply chain going forward.”
BioCarbonics’ supply sources are independent from the large ammonia and bioethanol sources, so it remains unaffected by the supply shortage and claims that it ’continues to operate without issues’.
Admitting that there is no short-term solution to the issue aside from purchasing high priced CO2 from CFI or high priced imports, the company stated that the supply concerns have been ongoing since 2006, becoming more volatile year-on-year.
The company added that current shortages are the results of low pricing for CO2 in the market, which has restricted suppliers’ ability to invest in alternative (higher cost) CO2 sources.
This could be mitigated by a heightened focus on long-term solutions such as biogas, which will become more economic to develop as investment increases.
With this taking potentially years to develop to replace the ammonia-based CO2 capacity in the UK, BioCarbonics stated that ‘it is a long-term game’.
The diversification of its 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.