Fertilizer giant shuts down factory and cuts hundreds of jobs in commercial shake-up

Wednesday 08 June 2022 4:40 pm

The UK’s largest producer of carbon dioxide (CO2) will shut down one of its two UK-based factories and cut hundreds of jobs in a vast restructuring operation.

CF Fertilizers has proposed the permanent closure of its manufacturing facility near Chester, which could result in up to 283 redundancies – and will continue its operations exclusively at its other site in Billingham, Teeside.

The company argues the restructure is essential to ensure the business remains profitable and sustainable, so that the company can still supply fertilizer, CO2 and other industrial products to its domestic customers.

Currently, it is responsible for 60 per cent of the UK’s CO2 production, and is also one of the leading domestic manufacturers of ammonia and fertilizer.

Its Billingham factory is the largest ammonia, ammonium nitrate (AN) and CO2 production facility in the country.

Commenting on the developments, Susannah Street, senior investments and market analyst told City AM: “The restructure of the company positioning itself for long term viability will come as a relief for the industries highly reliant on the production of fertilizer and carbon dioxide. There will still be some niggles of doubt about the volumes of the products available going forward given that one of its key plants will close permanently at a time when there is a global shortage. ”

CF Fertilizers navigates challenging headwinds

The decision follows an internal strategic review of its operations, after the producer was forced to halt operations at both its plants last September amid spiraling energy costs.

The facility in Cheshire has not restarted operations since, but production at the Billingham facility was revived after being bailed out by the taxpayer with three weeks of emergency funding.

The company then stayed operational over winter with reaching successive last ditch deals with the government – that did not include public money – to ensure supplies could be sent to UK industries over the winter.

This included sustained talks with the Department for Business, Energy and Industrial Strategy.

According to a confidential letter seen by City AMwarned Business Secretary Kwasi Kwarteng last year that high energy taxes and low-cost foreign imports could jeopardize the country’s supply of gas and the domestic fertilizer industry.

CF Fertilizers have reported that its ammonia sales volumes to domestic customers have fallen nearly 30 percent since the 2017-18 season, due to intense competition from lower-cost imports.

Industry reforms crucial for survival of domestic fertilizer sector

Natural gas is the principal fuel source in the production of many mainstream fertilizers, meaning spikes across benchmarks are highly influential to the margins of companies such as CF Fertilizers.

In the case of ammonia production, around 70 per cent of the costs involved is the price of natural gas.

The company forecasts that nitrogen facilities in the UK and Europe will be the world’s high-cost marginal producers for the foreseeable future, presenting a constant challenge to the sustainability of current operations.

As carbon costs continue to increase substantially in the UK, CF Fertilizers expects that its production will be placed at an even larger competitive disadvantage against imports without a carbon border adjustment mechanism to ensure a level playing field.

Alongside the factory closure, it could also permanently transfer the bulk of its business activities to CF Industries’ headquarters in the US, which could result in up to 55 redundancies, and could cut 33 more jobs through reorganizing its maintenance teams.

Brett Nightingale, managing director, CF Fertilizers UK said: “As a high-cost producer in an intensely competitive global industry, we see considerable challenges to long-term sustainability from our current operational approach.”

“Following a strategic review of our business, we believe that the best way to continue our legacy of serving customers in the UK is to operate only the Billingham manufacturing facility moving forward while addressing cost pressures throughout our business.”

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