Fears of CO₂ shortage after UK rules out state support for factory

The British government on Thursday ruled out further state financial support to keep a factory owned by the country’s biggest carbon dioxide supplier running, despite warnings its closure would threaten food production.

CF Industries, a US fertiliser group, this week announced the closure of its ammonia plant in Billingham, which produces CO₂ as a byproduct. It blamed the sharp rise in natural gas prices for making the energy intensive process uneconomical.

The move is a repeat of last September when the company closed the plant because of spiralling gas bills, only for it to resume operations after the government agreed to provide a three-week package of financial support.

The company suspended operations at a second factory at Ince in Cheshire at the same time but announced in June it was closing it permanently.

The government intervention last year was designed to avert a food industry crisis, as CO₂ is used in the beer and soft drink sectors and by meat suppliers to stun animals before their slaughter. The gas is also used as a coolant by the nuclear industry and in hospitals.

But the government on Thursday privately ruled out any extra help to encourage CF Industries to reopen the factory, with one official saying: “There will be no taxpayer support.”

“Since October we have worked really hard with industry . . . but since then they have built up diversity of supply, built up stockpiles, plants have come back online . . . it is for the industry to resolve this, if they haven’t sort[ed] out their supplies since October then that’s their problem, but most of them have,” the official added.

Neil Hudson, a Tory MP and member of the House of Commons environment select committee, said he had written to George Eustice, the environment secretary, urging government intervention.

Hudson, a trained vet, said that CO₂ was “pivotal” to the food sector and warned that the loss of fertiliser production at a time of “sky high” costs risked threatening farmers’ livelihoods.

Output from Billingham accounts for about 30 per cent of the UK’s needs, down from roughly 45 per cent last year, according to industry experts.

The British meat industry said it had serious concerns over the potential lack of sufficient CO₂ supplies.

“If there’s to be no further help from government to shore up CO₂ supplies in the UK, our only request is that they help prioritise strategically important industries like ours, where gaps in supply could result in serious animal welfare or food safety issues,” said the British Meat Processors Association.

Gavin Partington, director-general of the British Soft Drinks Association, said he was monitoring the situation. “Longer-term interventions that will help make the CO₂ market more resilient and stable are both necessary and overdue,” he added.

CF Industries has said it will import ammonia, a key component of fertiliser. The company in June announced that it would mothball its factory at Ince.

That decision comes against a broader trend of ammonia producers across Europe cutting production, sending European food and drink companies scrambling to secure tightening supplies of the gas.

Norway’s Yara, one of the world’s largest fertiliser producers, has announced it is cutting ammonia production because of rising gas prices. That follows similar moves by the likes of Germany’s BASF.

The UK government said the resilience of the carbon dioxide market had improved with additional imports, increased domestic production 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,” it added.