North American fertilizer production giant CF Industries Holdings Inc. (NYSE: CF) has announced that it is closing one of its British plants permanently as a result of struggles with skyrocketing energy costs.
The firm is restructuring its U.K. operations according to a press release issued Wednesday. Its production facility at Ince, Cheshire, has not produced any ammonia since September, when it was originally closed on a temporary basis because of soaring natural gas expenses.
The decision to permanently close the facility illustrates the challenges faced by European industrial producers because of increased fuel costs. The closure not only affects the already suffering fertilizer marketplace but also impacts the supply of industrial-grade carbon dioxide. That side product from fertilizer production is used in a variety of food production processes.
CF’s British operations have previously provided up to 60% of the total U.K. carbon dioxide production.
Britain’s natural gas prices are 50% above normal for the summer months and are expected to remain high into the winter. The ongoing Russian invasion of Ukraine also threatens additional supply cutoffs from Russia at any time.
CF said in its release that it will now concentrate all of its British production at its remaining Billingham plant. That facility is the largest producer of ammonium nitrate, ammonia, and carbon dioxide in the U.K.
The company reported that it had been experiencing sluggish fertilizer sales because of increased competition from lower-cost international suppliers even before the most recent energy price and supply crisis.
The COVID-19 pandemic and other factors have also led to reduced British demand that caused CF to export products at “unsustainably low margins” in order to attempt to keep the Ince facility operational.
CF said in its statement that as carbon costs continue to surge in the U.K., the company expects that its products will continue to face even greater competitive disadvantages when compared to imports.
Analysts suggest that demand for fertilizer in the U.K. is likely to fall further during the year. Any supply reduction caused by the CF closing is likely to be filled by lower cost imports of ammonia nitrate, nitrogen, and other fertilizer components.
As of Thursday’s close, CF’s stock price has fallen almost 9% during the week.