A major fertilizer manufacturer has been forced to shut down two factories in the UK as energy prices continue to soar in Europe.
The US-based CF Industries Holdings announced the shutdown of its manufacturing complexes in Billingham and Ince, with no timeline for when production may restart, as European power prices surge to multi-year highs.
The step comes amid an extreme squeeze for energy supplies across Europe and the UK that has sent spot prices for natural gas soaring by up to 20% – more than four times the level seen this time last year. The crunch was reportedly triggered by limited flows from the region’s top suppliers, Russia and Norway. Shipments of liquefied natural gas have also slowed, as Asia has started buying up cargoes to meet its own demand.
The October gas futures contracts at the Dutch TTF exchange climbed to a record high of €79 ($93.31) a megawatt-hour this week. The contract has risen more than 250% since January, according to Reuters, while benchmark power contracts in France and Germany have doubled.
Analysts at Goldman Sachs expect these soaring prices to evoke power outages during the upcoming winter with blackouts pushing bills even higher, raising concerns over the costs to businesses already shouldering higher costs for raw materials.
The shutdown of the CF Industries plants may have an impact on global pricing for fertilizers, with other producers following suit, according to Alexis Maxwell, an analyst at Bloomberg Intelligence.
“The market will read this as [evidence that] other European producers are likely to shut down, and nitrogen prices will continue to rise on the supply-side shortage,” the analyst said.
The world’s top oil importer, China, has reduced its crude imports by 5.7% since the start of 2021, but boosted natural gas purchases by over 20%, a report from the country’s State Statistical Office says.
From January to August, China imported 346.36 million tons of oil, which is 5.7% less than in the same period last year. At the same time, the country increased the volume of natural gas imports by 22.2%, to 79.31 million tons.
As specified in the document, in August alone, China purchased 44.53 million tons of crude (down 6.2% year on year) and 10.44 million tons of gas (up 11.5%).
Meanwhile, domestic oil production over the past eight months increased by 2.4%, amounting to 133.22 million tons. Domestic refining was also up by 7.4% to 470.79 million tons.
According to the report, China’s energy companies produced 136.1 billion cubic meters of gas in the reporting period (an increase of 10.8%). Over the past month alone, the country’s gas production increase amounted to 15.9 billion cubic meters, which is 15.5% higher than before the pandemic in August 2019.
Previously, China’s crude oil imports rebounded in July from a six-month low after state-backed refiners set out to increase output after returning from maintenance. However, independent refineries slowed their restocking due to official probes into trading and taxes.
Beijing has been carrying out investigations since April regarding illegal trading of import quotas, in part to lower a fuel surplus that has been hard on state-owned refiners’ profits.
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Rising gas prices will force European countries to restrain their ambitions to phase out coal and fossil fuels, according to an expert on EU energy markets, Simonas Vileikis.
“Underfilled storage facilities continue to push the price of gas higher. If the facilities are not refilled now, and the winter turns out to be rather severe, EU nations may be forced to reactivate thermal power plants operating on other types of fuel, including coal, to compensate for the lack of electricity,” Vileikis told TASS.
On Wednesday, European prices for gas hit a multi-year high of almost $970 per 1,000 cubic meters, extending the unprecedented rally seen over the past weeks. The surge in prices is projected to trigger power outages in the EU during the winter.
Steep gas prices have reportedly become a driver in lifting carbon and coal prices to record highs as well. Among the other factors contributing to higher energy costs, according to analysts, include low wind generation and nuclear plant unavailability across the continent.
