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LONDON — Europe’s soaring energy bills are triggering a wave of closures at major fertilizer factories across the continent, causing disruption for farmers, food manufacturers and – much to the horror of bar owners around the world – beer brewers.
On Thursday, the world’s largest fertilizer company, Norway-based Yara, announced a 50% cut in its production of urea and ammonia-based nitrogen fertilizers in Europe, citing “record prices” .
The decision came less than 24 hours after Britain’s biggest fertilizer plant, CF Fertilizers UK, said it would “temporarily halt” production at its Billingham plant. Two other major fertilizer producers in Poland announced they would suspend operations earlier in the week.
Fertilizer is not only vital for boosting soil fertility for crops, but its production creates a by-product, CO2 gas, which is used to add fizz to beer and soft drinks, supply hospitals for surgical procedures and allow animals to be slaughtered humanely.
Farmers, food manufacturers and even pub owners are therefore deeply concerned about the wider implications of a looming fertilizer crisis.
Carlsberg Polska, Poland’s third-largest brewing company and a subsidiary of the Danish multinational, told POLITICO it plans to halt beer production almost immediately – and other brewers are expected to follow suit.
“Few people realize that carbon dioxide is a by-product of fertilizer manufacturing. And it can’t be stored for very long, so we only have a few days of supplies left,” said Carlsberg Polska spokeswoman Beata Ptaszyńska-Jedynak.
“We’re going to stop producing beer any moment now… but we’re not the only ones. Unless they have facilities to produce their own CO2, most brewing companies will have to do the same.
The energy-intensive fertilizer sector is one of the first heavy industries in Europe to cut production amid the energy crisis exacerbated by Moscow’s invasion of Ukraine and subsequent Western sanctions against the Russian oil and natural gas – a necessary ingredient for nitrogen-based fertilizers.
Jacob Hansen, head of leading lobby group Fertilizers Europe, said soaring gas prices, which industry watchers predict will remain high until at least the end of the year, make it “impossible” maintaining production.
“It’s an impossible situation to live with. For me, it is obvious that the European gas market is broken – it is not working”, said Hansen. “We are relatively the biggest consumer of gas – so if we see the pain, the pain will come for other people as well.”
The closures have sparked fears across several food and drink sectors. Minette Batters, president of the UK’s National Farmers Union, said the closure of Britain’s biggest fertilizer plant was “extremely worrying”. The fertilizer market “is crucial to maintaining and improving our national food production”, she added, urging the government to review the availability of CO2-based products.
The UK brewing and pubs industry said the timing of the closure ‘couldn’t be worse’ and ‘could lead to beer shortages across the country’.
“Our pubs and brewers are already facing serious headwinds and pressures on their supply chains,” said Emma McClarkin, chief executive of the British Beer and Pub Association. “This decision raises serious concerns for the sustainable supply of CO2.”
Brewers and pubs are already facing “extreme” energy costs, she warned, which threaten to close businesses and damage livelihoods across the UK.
“Waiting even a few weeks for the government to act might be too long,” McClarkin added. “We need a sustainable plan for the supply of CO2 to our industry and urgent help to deal with the rising energy bills of businesses before they are forced to close their doors.”
Ptaszyńska-Jedynak of Carlsberg Polska said there were also wider implications beyond beer and soft drinks, as CO2 is used to make products like dry ice, which is essential for keeping things fresh. food during transport and storage.
“The situation is critical for all aspects of the food sector where CO2 is used,” Ptaszyńska-Jedynak said.
Polish Agriculture Minister Henryk Kowalczyk said on Thursday he was working on a plan that would help fertilizer producers buy gas at a moderate price. “We are working on that. For now, I don’t want to talk about specifics, we already have ideas there and we agree on solutions. said Kowalczyk.
To ease some of the pressure, the European Commission has proposed temporarily suspending tariffs on the main products to make nitrogen fertilisers, which national governments in the EU Council will discuss after meetings resume in September, according to an EU official.
In the UK, CF Fertilisers’ parent company CF Industries has already received a short-term bailout deal from the government, with a payment last September covering its operating costs for three weeks as fertilizer prices energy were increasing following the demand for post-coronavirus lockdown.
This time, however, ministers seem reluctant to intervene.
“As the government continues to examine options for the market to improve its longer-term resilience, it is essential that the industry acts … to do all it can to meet demand,” said a British government spokesman.
“Since last autumn, the resilience of the CO2 market has improved, with additional imports, additional production from existing domestic sources and better stocks,” added the government spokesman.
Some UK companies have diversified their CO2 supplies through imports since the initial crisis last autumn. As prices rose, other industries stepped in to capture the industrial byproduct and refine their own food-grade versions to sell. Last year, the Billingham factory provided 60% of UK supplies. It now provides only 30 percent.
“While we are in a much better position now than a year ago,” said Nick Allen, chief executive of the British Meat Processors Association (BMPA), “the UK meat industry will have serious concerns” if CF Industries stops production.
“We don’t see how the government can sit on the sidelines and insist that it’s up to the companies to sort it out among themselves,” Allen said. “They’re going to have to intervene.”
CF Industries already closed its sister factory in Cheshire in June, leaving UK CO2 supplies “vulnerable to any issues with their remaining factory in Billingham”, Allen said. British industry, he added, has been “heavily dependent on overseas suppliers to make up the shortfall”.
Since the end of July, ammonia producers in Italy and Germany have also cut production and sent European food and drink companies “jostling” to secure tight CO2 supplies, added Allen.
Without an adequate supply of gas, he said, farmers will potentially face an animal welfare problem, with growing numbers of pigs and poultry that cannot be sent for processing.
“Europe has always been a relatively high cost producer,” said Hansen of Fertilizers Europe. “We export a lot of specialty products to the rest of the world… We’re getting to a point where we can’t export anymore.”
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