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.
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