Government secures CO2 deal but food producers face anxious wait to ensure disruption is avoided

Wed 22 Sept 2021
Posted by: William Barns-Graham
Trade News

carbon dioxide used in meat production

The government has reached a short-term deal with the main supplier of carbon dioxide in Britain to resume production of the gas, avoiding fears that a shutdown could scupper food and drink supply chains.

CF Fertilisers halted production at two of its plants due to the soaring price of gas, which was making production of the gas uneconomical.

Yesterday (21 September), the government announced that it has reached an “exceptional” arrangement with the company, providing three weeks of financial support while the company adapts to the rise in gas prices.

Avoid disruption

Business secretary Kwasi Kwarteng said: “This agreement will ensure the many critical industries that rely on a stable supply of carbon dioxide have the resources they require to avoid disruption.”

Carbon dioxide is a crucial gas in many sectors, including food processing where it is used to stun animals prior to slaughter and to extend the shelf-life of foods.

Production to resume

According to the BBC, the CF deal could cost the government tens of millions of pounds but will be less than £50m.

Environment Secretary George Eustice told the BBC that the deal will be not a loan but will be a payment to underwrite some of their fixed costs.

CF produces 60% of the UK’s carbon dioxide needs at its two plants – the gas is a by-product of its fertiliser production. It expects to get one of the plants back in production within three days.

Disruption

Andrew Opie, director of food and sustainability at the British Retail Consortium, told the BBC’s Today programme that the timetable to restart producing carbon dioxide “will still be tight”.

“Our understanding is that provided that carbon dioxide starts to get through to food producers by the end of the week, then we can avert major and significant disruption in our stores,” he said.

Europe next

One of the world’s biggest suppliers of gases, Nippon, has told the FT that “other countries in Europe will also suffer shortages” of carbon dioxides and that its supplies had halved.

Norwegian chemicals group Yara said it was cutting its production of ammonia, which is used in fertiliser production, by 40% due to the rising cost of natural gas making it unprofitable.

Distribution of the gas is also being affected by a shortage of special trailers to transport it, said Dutch Company Carbonic Solutions.

More shutdowns

Analysts expect more shutdowns, with fertiliser plants in the UK and northern Europe needing gas prices to drop by 20% to break even, according to Allan Pickett, head of analysis at IHS Markit’s Fertecon.

“As long as gas prices remain at current levels it will be a serious situation for most European producers,” he added.