There are fears of food and drink supply issues due to shortage of CO2 as a vital Teesside ammonia plant has paused production.
CF Fertilisers, in Billingham, has announced it will “temporarily halt ammonia production" - which creates CO2 (carbon dioxide) as a by-product - "due to market conditions”.
"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,” the company added.
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The factory is so vital to the UK's supply that in February the Government struck a deal with CF to continue producing carbon dioxide to businesses after warnings from industry leaders. Carbon dioxide is used to slaughter livestock for meat, extends the shelf-life of products, and is also important for refrigeration systems.
The UK's food and drink industry relied on just "four or five" fertiliser producers in Europe for its CO2 supply, the British Meat Processors Association's GEO, Nick Allen said last year, when CF previously paused CO2 production, but since then, the Government says it has found new suppliers.
A Government spokeswoman said: “We are aware that CF Fertilisers has taken the decision to temporarily halt ammonia production in 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.”
The extra costs and supply issues will harm Britain's hospitality trade at a time when businesses are facing energy bills that are not capped like they are for private households. CO2 is used in carbonated drinks like beer, cider and fizzy pop.
Emma McClarkin, chief executive of the British Beer and Pub Association, said: “The timing of this news couldn’t be worse as our pubs and brewers are already dealing with severe headwinds and pressures on their supply chains. This decision raises serious concerns for the sustainable supply of CO2 to the brewing and pub industry.
“A guaranteed supply is essential for operations across pub and brewing businesses and this announcement comes at a time when they are already facing extreme cost rising that are threatening businesses and people’s livelihoods across the country.
“We urge the Government to urgently convene stakeholders to ensure there is a reliable supply of CO2 to our industry and others that depend on it.”
In February the Department for Business, Energy & Industrial Strategy said it was engaging with stakeholders with a view to making the CO2 market more resilient and less reliant on the Billingham plant, as it struck a deal to ensure CF Fertilisers continued with production "while global gas prices remain high". That followed the government giving CF financial support in 2021.
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