One of the UK’s leading fertiliser, CO2 and ammonia providers insists there have been no changes to its operations, despite energy prices soaring to record highs earlier this week.
CF Industries – which manages UK supplier CF Fertilisers – told City A.M. its processes remain stable.
A spokesperson said: “There has been no change to CF Industries’ operational status in the UK. The Billingham Complex is online and producing ammonia, nitric acid, ammonium nitrate and CO2. We continue to monitor energy market conditions and to have conversations with customers about the current commercial environment.”
There are growing concerns over potential fertiliser shortages following Russia’s invasion of Ukraine – as many of the key materials come from both countries.
Silver Street Capital’s Gary Vaughan-Smith argues the invasion of Ukraine will likely lead to significant fertiliser increases and potential shortages, with so many fertiliser ingredients facing supply disruption.
He said: “The Ukrainian Invasion will likely lead to significant fertiliser price increases and potential shortages, a critical implication of the Ukrainian invasion. Russia/Ukraine/Belarus represented 17.4 per cent of fertiliser exports in 2020 and Russia was ranked first. However, this understates their importance because Russia and Belarus are major suppliers of key fertiliser ingredients.”
Belarus and Russia represent more than 40 per cent of global exports of key material potash, while Russia represents around 10 per cent of global phosphate exports.
Russia and Belarus – alongside war-torn Ukraine – are also important suppliers of the nitrogen component in fertilisers – including 20-25 per cent of global ammonia exports.
Commenting on the likely consequences of raised prices, he said “The net impact of lower application of fertiliser, other things being equal, are higher food prices globally. There is a high degree of risk that this leads to reduced crop yields globally, and that this will lead to further food price inflation for longer around the world and potential food shortages in some areas.”
Gas price spike hits manufacturing
Natural gas prices have risen to record levels this week, peaking at an eye-watering £8 per therm on Monday amid growing fears of supply disruption following Russia’s invasion of Ukraine.
This is also more than double the energy price that stopped CO2 production at CF’s Billingham plant last autumn, forcing the government to support the group with public funding in an emergency deal.
CO2 is a key component in sectors such as food processing, nuclear power and killing livestock humanely – and CF Fertiliser is the UK’s largest supplier.
In September 2021, the government provided limited financial support for CF Fertilisers’ operating costs for three weeks, after production was halted at two of its plants.
The industry then came to a further agreement with Downing Street in October to ensure CF Fertilisers on Teesside could continue to operate for three more months without taxpayer support .
Aa third deal was reached in February to maintain the UK’s access to supplies.
Meanwhile, ammonium nitrate (AN) prices have skyrocketed over the past week – rising to between £850 to £1,000 per tonne – in line with wild volatility across European energy markets.
Across the continent, chemicals company Yara International temporarily cut production at nitrogen plants in Italy and France earlier this week as a result of gas prices.
Manufacturers in other countries such Turkey, which exports calcium ammonium nitrate to the UK, have also stopped production.