With heavy industry, rising gas prices will rise through supply chains

By Bozgmerm Sharafedin, Susanna Twidale and Roslan

LONDON (Reuters) – High natural gas prices are pushing some energy-intensive companies to reduce production in a trend that could disrupt global supply chains, such as food, and could lead to higher costs. Customers.

Some companies, including steel producers, fertilizers, and glass manufacturers, had to suspend or reduce production in Europe and Asia due to declining energy prices. That includes two world fertilizer producers who say they will cut production in Europe. The United Kingdom has agreed to provide government support to one of the companies to start production of comparable carbon dioxide used in production to alleviate the supply crisis.

Natural gas prices have risen sharply in recent months. That is due to a combination of a number of factors: low gas storage, including demand for post-epidemic recovery, especially in Asia; And stronger gas supplies than Russia.

Gas prices in Europe have risen by more than 250% this year, while Asia has seen an increase of about 175% since the end of January. Prices in the United States have skyrocketed for many years and are almost double at the beginning of the year. The cost of electricity has risen dramatically, as many power plants have run out of gas.

Industrial Energy Consumers A trade group representing US, chemical, food and materials manufacturers will help the US Department of Energy reduce the cost of energy for the industry in the coming days.

Additional gas supplies can ease the pressure. Norway allows gas exports to increase. Russia’s new Nord Stream 2 pipeline is expected to be approved by Germany at the end of the year, pending approval from German regulators. The pipeline project has been criticized by the United States for boosting Europe’s dependence on Russian energy supplies.

Product violations

So far, the pressures have been particularly heavy in Europe, with gas reserves much lower than usual during the winter. Norway’s Yara International Fish (ASA), one of the world’s largest fertilizer producers, announced on Friday that European gas production will fall due to high gas prices. That came after US-based CF Industries Holdings Inc. said it was pushing for gas prices to stop working on two British plants. Nitrogen-based chemicals and fertilizers Natural gas is an important expense source.

In an interview with Reuters, Yara CEO Sven Torre Holstein told Reuters that the company was importing ammonia from manufacturing facilities, including the United States and Australia. “Instead of using European gas, we are basically using gas from other parts of the world to produce and bring it to Europe,” he said. FF Industries did not respond to comments.

Some industries are calling on governments to intervene on their own. Last week, some countries, including Spain, approved a package of measures to protect consumers from higher energy bills, such as Spain.

Among those seeking help is the food industry, which has been hit by a shortage of carbon dioxide (CO2) at some fertilizer factories. CO2 is used in empty packages of food products to prolong their shelf life, to stunt animals before slaughter, and to feed the fish into soft drinks and beer.

Meat producers in the UK have warned that they will run out of CO2 within five days, forcing them to stop production. He said the supply of carbonated soft drinks for the production of carbonated beverages is declining.

On Tuesday, the British government announced that it had signed a three-week agreement with CF Industries for a US company to start producing carbon dioxide in the United Kingdom. Britain’s environment minister has warned the food industry that carbon dioxide prices could rise sharply, with the state’s support reaching tens of millions of pounds.

CF Industries said in a statement that it would resume production at the Birmingham plant following the agreement.

Correcting hurricanes

Other energy-intensive sectors, such as steel and cement, also suffer from stress.

Rising gas prices over the past two weeks have “forced some steel producers to stop working at night and during the price of energy rockets,” he said. He refused to identify which companies.

British steel, the country’s second-largest steel producer, said it would maintain its normal production levels, but said the “massive” energy price hike would “sometimes not be profitable.”

Some manufacturers claim to be able to withstand it.

Tysankrupp, Germany’s second-largest steel producer in Europe, says rising energy prices, especially gas-tightening, will not stop production. But he said he was indirectly harmed because the industrial gases he uses are linked to electricity prices.

Heidelberg Cement, Germany’s second-largest cement producer, says high energy prices are pushing up production costs, but as a result, work has not stopped.

According to Lee Ruping, a natural gas supplier in the northern province of Hebei, China, many steel, ceramic and glass manufacturers have reduced production to avoid losses. China’s southwestern state of Yunnan has this month imposed restrictions on the production of some heavy-duty industries, including fertilizer, cement, chemical and aluminum smelters, which could reduce exports, analysts said.

Analysts and traders say some energy-intensive industries and consumer companies in Asia and the Middle East have temporarily switched from gas to oil, crude, diesel or coal to cope with the storm. The Paris-based energy consortium says the trend is expected to continue until the end of the year and early next year.

Demand for coal as an alternative source of energy has also increased dramatically in Europe. However, due to government policies aimed at encouraging the use of fossil fuels, such as coal, alternative energy sources are limited in the region.

The glass industry has historically been based on fossil fuels, but almost all stations in the UK have now been converted to natural gas, said Paul Percy, co-ordinator of the British Glass Association. If prices increase, only a few gas stations will be able to switch power sources.

(Reported by Bozorgmer Sharafedin and London’s Susanna Tweidale, Roslan Kassawneh in Singapore; Additional Report by Gio Folconbridge, Nigel Hunt, Eric Onstad and Ahmed Gadar in London, Jessica Jaganantan and Chen Aizuhu in Singapore, Tokyo Yuka Obayashi, Nike, Singapore Heckon Young, and Christophe Stez in Frankfurt, Tom Casekhoff in Doseldorf, Polina Davit in Moscow, Arathy S Nair in Houston;

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