CF Fertilisers Shuts One of Two U.K. Plants

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--The U.K.'s only fertilizer manufacturer, CF Fertilisers UK, (Ince, Cheshire) is shutting one of its two plants as part of a company-wide restructure.

It will permanently close its site in Ince, near Chester, with the loss of 283 jobs, and instead focus all manufacturing at its plant in Billingham, Teesside. The company, a subsidiary of CF Industries Holdings Incorporated (NYSE:CF), claimed the move was needed to "position the business for long-term profitability and sustainability and enable it to continue to supply fertilizer, carbon dioxide and other industrial products." A further 33 jobs will go at Billingham along with more than 50 other positions where responsibilities will now be handled by the U.S. parent company. Billingham is the largest ammonia, ammonium nitrate (AN) and carbon dioxide (CO2) production facility in the country.

The closure comes at a time when fertilizer prices in the U.K. and Europe have increased dramatically since last year due to rising energy prices, a situation made worse by Russia's war in Ukraine. The Ince and Billingham plants were temporarily shut last September due to rocketing gas prices. Gas is the principal raw material and primary fuel source used in the ammonia production process for manufacturing facilities in the region, CF Fertilisers explained, adding that more than 70% of the total cost to produce ammonia is from the cost of natural gas. Billingham was brought back online in October following an interim agreement reached with the U.K. government to cover the costs associated with restarting the ammonia plant to produce CO2 for the U.K. market. The National Farmers Union (NFU) warned the U.K. government recently that fertiliser prices had jumped 180% from £281 (US$344) per tonne in April last year to £785 (US$960) per tonne this year, adding that there could be a significant impact on crop output.

"The people and facilities that make up CF Fertilisers U.K. are part of a proud, 100-year history of providing customers in the U.K. with products vital to the country's food security and industrial activity," said Brett Nightingale, managing director, CF Fertilisers UK. "However, as a high-cost producer in an intensely competitive global industry, we see considerable challenges to long-term sustainability from our current operational approach. Following a strategic review of our business, we believe that the best way to continue our legacy of serving customers in the U.K. is to operate only the Billingham manufacturing facility moving forward while addressing cost pressures throughout our business."

The company said sales of its ammonium nitrate (AN) fertilizer to domestic customers have dropped by nearly 30% since the 2017-18 season due to "intense competition from lower-cost imports." This has meant that over the past four years when both plants are producing AN--even at minimum levels--the company has been unable to profitably sell the entire volume domestically. This led to exporting at "unsustainably low margins" in order to continue to operate both facilities. The company expects tough times to continue, pointing to forward-looking natural gas prices that will make nitrogen facilities in the U.K. and Europe the world's highest-cost marginal producers for the foreseeable future.

The Billingham site produces about 128,000 tonnes of AN each year, while Ince was producing 95,000 tonnes annually before it stopped production. CF claimed that Billingham "has the capacity to produce enough AN to meet all forecasted domestic customer demand." The site has additional operational flexibility from a 40,000-tonne ammonia storage tank and "the ability to import lower-cost ammonia if necessary."

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