“I believe this is going to be a challenging summer/fall. CO2 demand continues to outpace the capacity being added and the current outages are only adding to that stress,” that’s what Ned Lane, CEO of CK Supply, told gasworld earlier this week in relation to the ongoing CO2 shortage in the US.
Lane, President of Cee Kay Supply, an independent supplier of compressed gases, welding and cutting equipment, and dry ice that serves Missouri and Illinois, is witnessing supply chain strains, like many in the US.
Adding to contamination stresses that are hitting the market, Lane also believes that Praxair’s (Linde plc) Hopewell CO2 plant in Virginia is also scheduled to shut down next month (September 2022). It is believed the plant has a total capacity of 1,500 tonnes per day, equating to approximately 75 truckloads of CO2 being pulled out of the supply chain daily.
The Hopewell closure is due to scheduled maintenance on the ammonia plant.
Ammonia plant closures due to scheduled maintenance occurs every year after the fertilizer season, so it is well known to the industry for planning purposes,” according to Maura Garvey, Principal, Intelligas Consulting. “The challenges surrounding the Denbury source have just made the logistics planning significantly more difficult. Since this issue is an annual occurrence, the industry and end users should be developing a longer-term plan to create a fly-wheel for the peak summer months.”
Ammonia production is a key sourcing route for CO2 production. In fact, ammonia plants have traditionally been one a large source of food-grade CO2 and while in the past decade other sources of CO2 have been invested in, including those raw gas streams from chemical operations and bioethanol plants, ammonia remains one of the largest sources.
Any shutdown in ammonia/fertiliser plants for an extended period naturally has an impact on the CO2 supply chain at some stage, as we have seen many times; CO2 shortages are almost an annual occurrence, as anyone in the industry knows.
Ammonia is a seasonal feedstock, with the peak production output for fertilisers generally from August to March, or during the winter months; hence why fertiliser companies often plan maintenance or shutdowns from April through to July.
Ammonia as a feedstock occupies a far greater share of the European sourcing pathways for CO2, with bioethanol a more dominant feedstock in the US, however such a fine tightrope of supply and demand means any disruptions to sourcing can have a significant impact.
Adding even further strain, it is believed further plant shutdowns are expected to take place over the coming weeks – meaning things could get worse before they get better. “There are at least four other smaller plants on shut down or scheduled for shut down over the next 60 days,” Lane confirmed.
Did we see this coming?
When attending the GAWDA Spring Management Conference earlier this year, Brad Dunn, Executive Vice-President of CK Supply, projected that allocations, surcharges and delivery delays would become more common in the CO2 market, and that opportunity is going to exceed supply.
Outlining demand in the US CO2 market at the time (April 2022), Dunn highlighted that the sector currently represents 11% of industrial gas revenues, according to Intelligas Consulting. As it stands, the food and beverage market is the largest consumer of CO2 and takes up 70% of the market demand, 30% being for other applications.
Speaking during the SMC, Dunn explained, “CO2 demand in the US is currently 10.3 million tonnes per year, which equals production. However, US demand is projected to grow 2/.5% AGR during the next few years. That being said, to meet the five-year growth forecast, 1,600 tonnes per day of additional capacity is needed to be developed.”
Further highlighting the additional need for new capacity, Dunn said, “None of the historic uses of CO2 are going down, everything is just going up. Opportunity will succeed supply. These opportunities will include demands from micro-breweries, cannabis growers, meal distributors, stunning, food freezing and dry ice.”
CO2 shortages have also been quite a regular occurrence in both the US and Europe in recent years. In fact, just last year gasworld reported that there was a tightening in supply across some areas in the US.
At the time, some major industrial gas companies were on force majeure in certain states like Arizona, and there are ethanol and ammonia plants down in the Midwest, with some customers on 50% allocation, according to sources at the time.
One year on and we find ourselves amidst another shortage, however, this time for a different reason.