Major supplier of carbon dioxide halts production, prompting food supply chain fears

Fri 26 Aug 2022
Posted by: Phillip Adnett
Trade News

Food and Drink Co2 Shortages

The government said it was examining options to secure UK CO2 production after one of the main producers said it was “uneconomical” to continue manufacturing.

Food and drink producers are warning that supply chains could be affected after CF Fertilisers, in Stockton-on-Tees, said it has decided to pause production of ammonia due to rising gas prices.

Supply chain

The company produces ammonia for fertiliser, with the CO2 by-product widely used in the food and drink industries – including the slaughter of animals, packaging and fizzy drinks.

CityAM reports that the move has raised doubts around the supply of the crucial gas, which is relied on by a variety of other industries – including in the medical field and in pubs.

In a statement to the BBC, CF said: “At current natural gas and carbon prices, CF Fertilisers UK’s ammonia production is uneconomical, with marginal costs above £2,000 per tonne and global ammonia prices at about half that level.”

Government action

The government intervened to ensure production at the plant last September, as increased gas prices threatened closure.

Nick Allen, chief executive of the British Meat Processors Association, said that the sector was in a “much better position” than last year but urged the government to act once more.

A government spokesperson said that while the government looked into longer term solutions it was “essential” industry leaders “do everything it can to meet demand”.

Demand will be met

According to the Daily Mail, the government’s last bailout of CF cost £30m and it will not provide another, despite concerns about food shortages.

A Whitehall source said that critical demand would be met through a separate CO2 facility in Yorkshire. 

However, government sources estimate other sources will only provide around 50-60% of UK demand.

British Beer and Pub Association CEO Emma McClarkin said that “a guaranteed supply is essential for operations across pub and brewing businesses” with pubs already facing rising costs.

Fertiliser market

NFU president Minette Batters said the move by CF Fertilisers was “extremely worrying and is a sign of the pressure the fertiliser and energy markets are under”.

CF Fertilisers has said it will still be able to meet all fertiliser orders, adding that it has yet to decide when the shutdown will start, reports Teesside Live.

Reuters reports that fertiliser manufacturers across Europe are being similarly affected by spiking gas prices with large player halting production or slashing it drastically.