Situation with Co2 supplies set to deteriorate markedly

This week the security of UK Co2 supplies to critical industries like health, nuclear and food took a a major blow. We had the twin announcements of the imminent cessation of production at CF Industries’ last remaining UK fertiliser plant alongside the planned September shut down for maintenance of the only other significant Co2 manufacturing plant at Ensus in Teeside.

Coupled with similar closures and the scaling back of production right across Europe, this looks set to herald a supply squeeze and steep price rise that has not been seen before as industries compete for a dwindling supply of the gas. In fact, reports are already surfacing of huge price hikes from the big wholesale gas suppliers like BOC and Nippon.

So far, the line taken by Government is that it’s up to industry to sort it out amongst themselves with one spokesperson commenting: “While the government continues to examine options for the market to improve resilience over the longer term, it is essential industry acts in the interests of the public and business to do everything it can to meet demand.” Given this week’s developments, this approach could result in more of a darwinian free-for-all than an orderly free market adjustment.

So it’s no surprise that more and more voices are joining the chorus of pleas to Government to intervene in order to avoid the predictable consequences that will ensue. We’d like to see Government get to the bottom of where these crippling price rises are originating and intervene to stabilise the situation, especially as Co2 supplies have not yet been switched off.

Is it simply manufacturers passing on cost-of-production increases? Is it opportunistic profiteering by wholesalers or manufacturers? Are certain industries that are more vulnerable to shortages seeing steeper price hikes than others? Or could it be that supplies across Europe have reached such critical levels that a bidding war has broken out amongst the largest users and the countries most keen to shore up supplies?

Whatever the reason, it’s gone beyond a problem that can simply be fixed by market forces alone and has entered the territory of needing firm and swift Government intervention.