Britain’s biggest carbon dioxide producer and its three industrial gas customers have struck a deal to secure supply that ends weeks of uncertainty and averts a crisis in the country’s meat, beer and soft drinks sectors.
The agreement enables US fertiliser group CF Industries to continue to supply industrial gas companies BOC, Nippon Gases and Air Liquide even while global gas prices remain high, said the Department for Business, Energy and Industrial Strategy on Tuesday. “It means key sectors, including food processing and nuclear power, are ensured supplies of CO2,” it added.
CF Industries said its plant in Billingham, north-east England, “remains operational and continues to sell CO2 on a contractual and spot basis”. Air Liquide, one of the UK’s three largest distributors of the gas, said: “We’re committed to do our best to supply the UK market with CO2.”
The new deal comes after contracts between CF and the three industrial gas companies signed last October expired at the end of January.
CF shut its two UK plants last September, as surging natural gas prices made the production of fertiliser uneconomical. But it also cut off a large portion of the UK’s supply of CO2, a byproduct of the fertiliser manufacturing process, prompting warnings of chaos, especially in the meat industry which uses the gas for slaughtering livestock. The gas is also used in food and drink production and packaging.
Production at CF’s Billingham plant resumed after the government stepped in to offer a three-week subsidy and brokered new contracts between CF and the industrial gas groups.
Sections of the food industry expressed relief that a deal had been reached. “It bears out [the government’s] decision to step in in October, which meant this deal had time to be negotiated. This gives our industry more time to find other sources of CO2,” said Nick Allen, chief executive of the British Meat Processors Association.
CO2 prices had roughly quadrupled since shortages began last year and would contribute to overall cost inflation, though they were a relatively small component of the total for meat producers, said the BMPA.
Richard Griffiths, chief executive of the British Poultry Council, said: “I don’t know whether there’s a duration attached to this agreement, but anything that guarantees the supply is good news. No increase in cost is welcome, but given the context this is the best outcome we could have hoped for.”
The crisis sparked concern among some meat producers that the industry was too reliant on CF for CO2 supplies. Since last September, however, more companies were looking for alternative sources, cutting CF’s share of the market to 30 per cent from about 60 per cent, said Allen.
He added that higher CO2 prices meant more businesses, including other fertiliser makers, were now selling the gas rather than releasing it into the atmosphere.
Emma McClarkin, chief executive of the British Beer and Pub Association, said that brewers “urgently” needed to see the details of the agreement “to understand the impact on our sector and the longer-term sustainability of CO2 supply”.
Some brewers have switched to alternative suppliers. St Austell Brewery in Cornwall is buying from BioCarbonics, which generates CO2 from corn being broken down through anaerobic digestion and accounts for about 4 per cent of the UK market. BrewDog has invested in building a CO2 recovery plant at its brewery in Ellon, Scotland.
Grant Pearson, commercial director at Ensus, which makes bioethanol from corn and supplies about 30 per cent of the UK’s CO2, said there had also been a switch to alternatives. “Some downstream users have switched to nitrogen instead of carbon dioxide, depending on availability and price. There will be some lowering of demand.”