Brewing trouble in Co2 gas market likely to hit this Autumn

Since the last Co2 crisis, which was precipitated by the closure of fertilizer plants, meat companies are mitigating the risk of a future supply shock by moving away from Modified Atmosphere Packaging and using vacuum packing where they can, reducing the need for Co2.

They have also diversified their sourcing of Co2. Some rely on the bioethanol producers who are now at risk following the UK/US trade deal. Where space allows, some plants have set up their own on-site bio-digesters which allows them to process waste, capture Co2 and clean it to food grade standard for us in the plant. But most still rely heavily on intermediary gas supply merchants, and the UK now imports around 60% of its Co2 needs.

At this point in time our members tell us they have received no warnings from their gas suppliers that there will be a problem. That said, the Co2 supply chain is notorious for not flagging problems early. It's also very concentrated, meaning that very few merchants control the vast majority of the gas supply and are able to command very healthy markups.

It's widely expected that the the hit to the UK bioethanol industry could come as soon as the Autumn. This would mean the UK becomes more reliant on imported Co2 which could also put upward pressure on prices as well as further concentrate control of the Co2 market into the hands of the merchants. So, the pricing of any forward supply contracts that will extend beyond this Autumn could be affected. Whether it triggers another shortage of Co2 remains to be seen. It would only take a plant on the continent to shut down for cleaning to put Co2 supplies under renewed pressure.