Fertilizer producer CF Industries Holdings Inc said on Wednesday it was halting operations at both its Billingham and Ince, UK, manufacturing complexes, citing high natural gas feedstock costs.
The move comes amid a surge in European gas prices heading into winter on tight inventories, which has raised the procuring costs of natural gas, a key raw material used in nitrogen fertilizers.
European gas prices are hovering around $23 per million British thermal units (mmBtu) as of Wednesday, while U.S natural gas futures settled at a seven-year high of $5.460 per mmBtu.
CF is shutting down the facilities because the economics do not make sense, Ben Isaacson, analyst at Scotiabank, wrote in a note.
However, he added the idling would probably not lead to incremental losses, as even under normal conditions the company’s UK assets generate only 2.5% to 3.0% of quarterly EBITDA.
“This is why we think investors should look past CF idling the plants,” Issacson wrote.
CF did not have an estimate for when the production will resume at the facilities.
The company on Thursday began restarting ammonia plants in Donaldsonville, Louisiana, after halting production due to hurricane Ida. (Reporting by Rithika Krishna in Bengaluru; Editing by Krishna Chandra Eluri)