The UK carbon dioxide shortage threatening industries from healthcare to food is spilling over into Europe, one of the world’s largest distributors of the gas has warned.
Nippon Gases, which sold almost $1.5bn of industrial gases on the continent last year, said “other countries in Europe will also suffer shortages” of CO2, estimating that its supplies had fallen 50 per cent across the region.
Soaring natural gas prices have forced closures of fertiliser plants, the UK’s main source of CO2 used to make drinks fizzy, stun animals for slaughter and cool nuclear power plants.
Nippon’s stark message was echoed by the head of Yara, the Norwegian chemicals group that announced last week it would slash 40 per cent of its European production of ammonia — an important input for one of the most commonly used fertilisers.
Svein Tore Holsether, its chief executive, said record natural gas prices were crippling the profitability of European fertiliser plants, which used the fossil fuel as a feedstock to make ammonia.
“We’re running at a huge negative cash flow,” he added. “Ammonia production with today’s natural gas prices and today’s spot prices for ammonia is simply not profitable in Europe.”
He said natural gas was costing the group $900 per tonne of ammonia it made, resulting in a deep loss of $300 for each unit sold and making it economic to import ammonia to make finished fertiliser products.
Yara’s announcement followed the closure of two CF Industries fertiliser plants in the UK, where surging natural gas prices have stung a number of industries.
The UK government struck a deal with CF on Tuesday to provide financial support to restart the plant. Environment secretary George Eustice said the government would support CF “just for a few weeks” at a cost of “possibly tens of millions” of pounds.
Along with the wave of fertiliser plant stoppages, many electricity providers are on the verge of bankruptcy and sectors from soft drinks to meat are affected.
Industrial gas companies are prioritising CO2 supplies to end users. Japanese-owned Nippon Gases, which supplies Scandinavian and western European nations including Sweden, France and Germany, said nuclear power stations, meat production and medical purposes were top of the list.
Carbonic Solutions, a Dutch group that supplies the UK with CO2 generated by biogas plants, warned that special equipment to transport the gas was in short supply as distributors including Linde, Air Liquide and Air Products started sending trailers further afield for CO2 supplies.
“You have an issue where you don’t have the distribution assets to bring them where they need to be,” said Christopher Carson, managing director.
Apart from the UK, Yara said it would reduce output in countries including Norway, the Netherlands, Germany and Italy.
“The impact is massive. We expect more and more shutdowns in western and eastern Europe and Ukraine,” said Jennifer Willis-Jones, commodity analyst at CRU.
Nippon Gases said it expected gas and electricity futures markets to remain tight into spring next year.
Allan Pickett, head of analysis at IHS Markit’s Fertecon, said fertiliser plants in the UK and northern Europe needed gas prices to be about 20 per cent lower than current levels to break even.
“As long as gas prices remain at current levels it will be a serious situation for most European producers,” he added.
Source: Economy - ft.com
