CF Industries Holdings Inc. will close one of its United Kingdom (UK) fertilizer plants permanently as it struggles with high energy costs.
The company is proposing to shut down the Ince facility as it restructures operations in Britain, it said Wednesday. The site, which hasn’t produced ammonia since September, was one of CF’s plants halted last year as soaring gas costs squeezed profitability. That prompted the government to step in to help keep some operations going.
The move to close the factory highlights the challenge that expensive gas poses to European industries. The threat to fertilizer output has also been bad news for the food and drink sector because the factories produce carbon dioxide as a byproduct. That gas is used to stun pigs and chickens for slaughter, extend the shelf life of fresh food and give beer and soda their fizz.
Fertilizer output at CF’s Billingham and Ince sites has provided as much as 60% of Britain’s CO2 production. The UK government has called the gas an “essential component of the national economy.”
Gas prices have eased from a record, but are still 50 per cent above usual for this time of year. High prices are expected to continue into winter and the risk remains of further supply cutoffs from Russia. Prices will stay high for the next two years, according to ING Bank NV.
CF said it would focus its UK manufacturing operations at its Billingham plant, which is the UK’s largest ammonia, ammonium nitrate and CO2 site. That facility is better positioned for long-term sustainability as it has sufficient capacity to meet all domestic demand, it said.
Even before the energy price crisis, the company’s fertilizer sales were lagging due to competition from lower-cost international supplies. Muted demand in the UK has meant that CF has been forced to export at “unsustainably low margins” in order to continue to operate both facilities, the company said.
“As carbon costs continue to increase substantially in the UK, the company expects that its production will be placed at an even larger competitive disadvantage against imports,” CF said in a statement.
Fertilizer demand is expected to fall further in the UK this year, according to CRU Group. Whatever gap is created by the closing of Ince is likely to be filled by the import of other nitrogen products like ammonia nitrate and urea, analyst Shruti Kashyap said.
The shutdown of Ince could lead to as many as 283 redundancies, the company said.
• By Bloomberg|Áine Quinn, Rachel Morison