U.K. in Deal to Restart Fertilizer Output, Easing CO2 Crunch

(Bloomberg) --

The U.K. government said it will provide “limited financial support” to help CF Industries Holdings Inc. restart fertilizer production hit by a gas crunch, in a bid to ease a shortage of carbon dioxide that’s crucial for the food industry.

The deal will allow CF Industries to restart operations at its plant in Billingham, northeast England, the Department for Business, Energy and Industrial Strategy said late Tuesday in a statement. The government said it will provide financial support to help cover the plant’s operating costs for three weeks, giving the CO2 market time to adapt to higher global gas prices, it said. 

CF confirmed in a separate statement Tuesday that it will immediately restart the ammonia plant at its Billingham complex. 

“This agreement will ensure the many critical industries that rely on a stable supply of CO2 have the resources they require to avoid disruption,” Business Secretary Kwasi Kwarteng said in the statement. “In our ongoing response to manage the impact of global gas price rises, we will continue to protect businesses and consumers.”

The deal will relieve the threat of further disruptions to the U.K. food industry, which was already battling to keep shelves and menus stocked due to a lack of workers. High gas prices last week forced the fertilizer maker to close two U.K. plants that make carbon dioxide as a byproduct, posing an imminent threat to the food industry, which uses the gas widely.

CO2 is used to stun pigs and chickens for slaughter, as well as in packaging to extend shelf life and the ‘dry ice’ that keeps items frozen during delivery. Online grocer Ocado Group Plc had to stop supplying frozen products and the meat sector warned that businesses could “grind to a halt” within weeks.

Fertilizer output at CF Industries’ Billingham and Ince sites provide as much as 60% of Britain’s CO2 production.

The British Poultry Council earlier welcomed news of the government’s intervention, and said it’s waiting for officials to detail how it will work in practice. It also said it is just the start of a “long road ahead,” adding that food must be treated as a national security issue. 

It’s vital that production “is restarted as soon as possible, and distributed quickly to food manufacturers,” said Andrew Opie, director of food and sustainability at the British Retail Consortium. 

About 80% of pigs and poultry in the U.K. are slaughtered using CO2, and there’s little scope to change the process for hogs as it’s considered the most humane method, according to the British Meat Processors Association. Staffing shortages across U.K. slaughterhouses have already left pig farms crammed with some 100,000 extra animals, forcing farmers to resort to cattle barns to potato storage sheds to house them.

The Food and Drink Federation said if production can restart at appropriate scale before the end of the week, that should ensure pig and poultry output can continue at close to normal. There will still be some shortages, but not as bad as previously feared.

The British Soft Drinks Association has said manufacturers have just days of carbon dioxide left in reserve to produce beverages and can’t import supplies from the European Union due to Brexit. The group said on Tuesday that it’ll likely still take a few days for fertilizer plant production to resume, and combined with ongoing trucker shortages, some beverages still may not be “as abundant as usual” over the next week or so.

CO2 supplies have also been hit as Norway’s Yara International ASA curtails European capacity. CF Industries shares rose as much as 2.9% in New York, before paring some of the gain.

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