Production at CF Industries' Billingham ammonia plant is to be halted as the company says the spiralling cost of gas is making it uneconomical.
The US fertiliser manufacturer issued a statement saying it had not yet decided when the temporary shutdown would occur, but that it did not anticipate an impact on jobs. It will continue ammonium nitrate (AN) and nitric acid upgrade activities at the North East base using imported ammonia.
The move has ramifications for the UK food and drink industry which uses the CO2 byproduct of the ammonia production process. CF, the largest CO2 producer in the UK, said it had notified customers which include meat producers that use the gas to stun animals before they are slaughtered and drinks manufacturers which use it in the carbonisation process.
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In a statement, the firm said: "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 current cost of natural gas at natural balancing point is more than twice as high as it was one year ago, with the natural balancing point forward strip suggesting that this price will continue to rise in the months ahead."
It is the second stoppage for CF in that last 12 months due to the soaring natural gas prices - a move which has previously triggered warnings of food shortages across certain products, including beer. Since September last year the firm has struck three deals for government support to continue production - the latest in February.
And earlier this year CF revealed a plan to mothball its Ince plant in Cheshire with the loss of 283 jobs. It has previously said the Teesside facility is better positioned for long-term sustainability as it has sufficient capacity to meet all forecasted domestic demand for ammonium nitrate fertiliser from CF Fertilisers UK, is more efficient than the Ince manufacturing facility, has an installed industrial customer base, and has the ability to import ammonia.
The company said it expects to fulfil all ammonia and nitric acid contracts and all orders of ammonia nitrate contracted for delivery in the coming months.
Nick Allen, chief executive of the British Meat Processors Association, said the Government will “need to step in”. He said: "Whilst we are in a much better position now than we were a year ago, if CF Industries follows through on its threat to close Billingham the British meat industry will have serious concerns. Without sufficient CO2 supplies the UK will potentially face an animal welfare issue with a mounting number of pigs and poultry unable to be sent for processing."
Emma McClarkin, chief executive of the British Beer and Pub Association, said the timing of the announcement “couldn’t be worse” as she also called for the Government to intervene. "This decision raises serious concerns for the sustainable supply of CO2 to the brewing and pub industry," she said. "A guaranteed supply is essential for operations across pub and brewing businesses.”
A Government spokeswoman added: "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."
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