CO2 shortage – UK details “short-term” deal to restart production
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CO2 shortage – UK details “short-term” deal to restart production

By Dean Best 21 Sep 2021 (Last Updated September 22nd, 2021 14:08)

The UK government described the deal with US fertiliser group CF Industries as an “exceptional short-term arrangement”.

CO2 shortage – UK details “short-term” deal to restart production

The UK government has announced a deal to resume output at one of two fertiliser plants where shutdowns last week led to fears of pressure on food supplies.

In a statement issued just before 10pm local time last night (21 September), the UK’s Department for Business, Energy and Industrial Strategy (BEIS) said an agreement had been reached with the owner of the two sites, US-based fertiliser group CF Industries.

George Eustice, the UK’s Environment, Food and Rural Affairs Secretary, said the deal with CF will cost tens of millions of pounds.

“It’s going to be into many millions, possibly the tens of millions but it’s to underpin some of those fixed costs,” Eustice told Sky News. “They’re big costly plants”

Last week, CF Industries stopped production at the two facilities, both in northern England, pointing to high gas prices. The move prompted concerns in the food sector about supplies of CO2, which is a by-product of fertiliser manufacturing and widely used in areas such as meat processing and the packaging of chilled foods.

This afternoon, there were a number of media reports saying the Government and CF Industries had reached an agreement on the resumption of production but there was no formal announcement from either side.

A few hours later, a statement was issued by BEIS, announcing an “exceptional short-term arrangement” with CF Industries’ local arm CF Fertilisers over one of the two facilities, based in Billingham in north-east England.

The deal “will allow the company to immediately restart operations” at the site, BEIS said. It added: “The Government will provide limited financial support for CF Fertilisers’ operating costs for three weeks whilst the CO2 market adapts to global gas prices.”

The two CF Industries plants, located in Billingham and in Ince in Cheshire in the north west, account for 60% of the country’s CO2 production, food industry executives say.

BEIS said the UK government had held talks “with the main food producers, their trade bodies and the major supermarkets and they are committed to doing whatever it takes to move to a sustainable market-based solution by the end of the three-week period”.

UK Business Secretary Kwasi Kwarteng added: “This agreement will ensure the many critical industries that rely on a stable supply of CO2 have the resources they require to avoid disruption. The quick and decisive action we have taken to resolve the issue shows the seriousness with which we have approached it. In our ongoing response to manage the impact of global gas price rises, we will continue to protect businesses and consumers.”

The UK government argues the deal will “ensure immediate supplies to the food sector remain in place”.

Environment secretary Eustice said: “We have acted decisively to ensure that CO2 supplies, which are critical to some of our food sectors, continue to be available following some exceptional events. However, this is a short-term intervention to provide the space and time for market adjustment.”

In the wake of this afternoon’s media reports but before the formal announcement, UK food industry groups were cautious in their response.

“If today’s conversations on shortages have given the CO2 manufacturers enough confidence to restart production, this is to be welcomed. We don’t yet have the detail but if production can restart at appropriate scale before the end of the week, this should be enough to ensure pig and poultry production can continue at close to normal. There will be some shortages, but these will not be as bad as previously feared,” Ian Wright, the chief executive of UK manufacturing body The Food and Drink Federation, said.

“When we are certain that the immediate supply issues are resolved, we should then work with government to build resilience into the production of CO2 to protect our food supply chain.”

The British Poultry Council, which had called on the UK government to “financially support” the production of CO2 in the country until the end of the year, also gave the news of a deal a tentative welcome.

“The announcement that the Government has reached an understanding with CF Industries is good news for the continuation of CO2 production to keep food moving. We thank the Government for this intervention. We are currently waiting for Defra to facilitate how this will work in practice,” Richard Griffiths, the council’s chief executive, said.

“This is just the start of a long road ahead. This episode has demonstrated the importance of CO2 in British poultry production, to avoid both bird welfare and supply issues. Food is a national security issue and must be treated as such: total poultry production in this country is around 20 million birds a week. The whole poultry meat industry is working tirelessly to avoid food shortages or the worst-case scenario of empty supermarket shelves.”

There had been warnings from the UK food industry the sector had between five and 15 days’ supply left. Some meat processors were reportedly having to choose whether to use their dwindling supplies of CO2 for slaughtering or packaging.

The pressure on CO2 supplies was the latest jolt to the UK’s food supply, already buffeted by a lack of HGV delivery drivers and a shortfall of workers in certain areas of processing.