High gas prices force closure of two UK fertiliser plants

UK energy updates

Soaring gas prices have forced the closure of two fertiliser plants in the north of England in one of the first signs that a global supply crunch could force many energy intensive industries to scale back activity this winter.

New York-listed fertiliser group CF Industries Holdings is halting production at its plants in Billingham in Teesside and Ince in Cheshire because of high gas prices. It did “not have an estimate for when production will resume at the facilities”, the group said in a statement overnight.

British Gas-owner Centrica had warned at the start of the month that a global supply crunch could force heavy industry to curb production in the winter months. UK Steel, a trade body, had also warned this week that some of its members were suspending operations during certain hours of the day when energy prices were “eye-watering”.

Gas prices in the UK and Europe have surged to fresh highs in recent weeks as traders warn the continent is heading into the key heating season with record low stocks. Stocks were left low after extended cold weather last winter, while lower supplies from Russia and strong demand for liquefied natural gas (LNG) in Asia has limited injections into storage facilities over the summer. The gas crunch has had a knock-on effect on power prices.

CF Industries’ Ince plant has been in operation since 1965, employs 400 people and produces about 1 million tonnes of fertiliser a year, according to the company’s UK website. The Billingham facility has a workforce of 190 people.

“Companies who directly face these prices as a large cost may struggle this winter as there appears to be little sign of these prices slowing down,” said Rajiv Gogna, a partner at LCP Energy Analytics.

The closures are likely to increase pressure on UK ministers and British energy regulator Ofgem to take action to protect industry and households.

Gareth Stace, director-general of UK Steel, said earlier this week that “the [UK] government and Ofgem must be prepared to take action as this situation continues”, adding that “the situation gets more urgent each and every day”.

In Britain, already high gas prices were exacerbated this week by a fire at the UK’s main subsea cable that imports electricity from France. The IFA1 cable, which normally has a capacity of two gigawatts, will only run at half capacity until the end of March next year following the incident. Analysts believe the country will have to rely even more heavily on gas-fired power stations in coming weeks and potentially months.

The UK government has been approached for comment on the fertiliser plant closures.

With reporting by Tom Wilson in London

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