Britain's only domestic fertiliser factory producing carbon dioxide is being shuttered due to high energy prices, raising alarm for the many organisations that depend on the gas for surgical operations, meat processing and production of beer and fizzy drinks.
With fertiliser prices reaching ever higher records this year, driving up farm input prices along with energy costs, the closure has also raised fresh worries about rising costs and potential livestock culls
CF Fertilisers UK, a subsidiary of US giant CF Industries Holdings Inc (NYSE:CF) said it is temporarily stopping production at its Billingham factory as it has become uneconomical due to high gas prices.
The company put out a statement overnight saying current costs of natural gas are more than twice as high as a year ago, with prices expected to continue rising in the months ahead.
CF said it expects to fulfil all ammonia and nitric acid contracts and all orders of ammonia nitrate contracted for delivery in the coming months and will use the site to import gas from abroad.
The US company said in June it would permanently close its Chester plant, leaving Britain with just the Billingham fertiliser plant producing carbon dioxide.
After a surge in wholesale gas prices last year, the government agreed a deal to allow the company to raise prices instead of receiving subsidies, as the government had previously been covering the operating costs at Billingham.
A government spokesman told media: “We are aware that CF Fertilisers has taken the decision to temporarily halt ammonia production at Billingham. Since last autumn, the CO2 market’s resilience has improved, with additional imports, further production from existing domestic sources and better stockpiles.
“While the government continues to examine options for the market to improve resilience over the longer term, it is essential industry acts in the interests of the public and business to do everything it can to meet demand.
“We are engaging with businesses across the food and drinks industry to understand any potential impacts.”
With fertiliser costs for farmers reaching record levels, this will be "sowing the seeds for more painful price rises for shoppers who are already struggling", said Susannah Streeter, analyst at Hargreaves Lansdown.
She noted that agriculture input prices rose 33.1% between June 2021 and June this year, with a big jump in April and steady increases in May and June.
"Fertiliser prices have hurtled upwards and were the biggest contributor to the alarming jump in farmers’ costs, even before the latest supply crunch concerns.
"The decision by CF Fertilisers to stop the production of ammonia, a key ingredient, because soaring gas costs mean it is no longer commercially viable, has led to fears of fresh shortages and price rises.
"Although the company says it’ll import ammonia to fulfil orders over the next few months, it underlines the huge difficulties in the fertiliser industry right now. Livestock farmers face a potential double whammy of consequences due to the closure.
"Not only do they often use fertiliser on grass to feed animals, there is now set to be a shortage of CO2 gas, due to the ammonia production shutdown, which is used to stun livestock before slaughter.
"Farmers may once again face the difficult decision of having to cull animals if a backlog builds up for abattoirs and if a solution to the looming CO2 shortage isn’t found quickly."