Europe’s energy crunch has forced a major fertilizer maker to shut down two U.K. plants, the first sign that a record rally in gas and power prices is threatening to slow the region’s economic recovery.
CF Industries Holdings Inc. said Wednesday it’s halting operations at its Billingham and Ince manufacturing complexes due to high natural gas prices, with no estimate for when production will resume. European gas and power futures tumbled Thursday on signs energy-intensive industries are curbing consumption.
The move comes as Europe is facing an extreme squeeze for energy supplies, with gas and power prices breaking records day after day. The continent is running out of time to refill storage facilities before the start of the winter as flows from top suppliers Russia and Norway remain limited. There’s also a fight for shipments of liquefied natural gas, with Asia buying up cargoes to meet its own demand.
The crisis could have severe economic consequences. Soaring prices are exposing the risk of power outages this winter, according to Goldman Sachs Group Inc. Blackouts would likely send energy prices even higher, compounding concerns about inflation and adding to the rising costs businesses are already shouldering for raw materials.
CF has so far taken the most drastic move of companies operating in the region, but others are warning of the likely blow-back.
High energy prices are creating “inflationary pressure on every other cost” that will end up being passed on to customers, said Pascal Leroy, senior vice-president of core ingredients at Roquette Freres SA, a food processing company based in northern France. And France’s top sugar producer, Tereos, warned of surging natural gas prices raising production cost for the company “tremendously.”
Europe’s energy markets are also just the latest example of the toll that soaring commodity prices are having on the global economy. Tight supplies of everything from aluminum to grains to oil have sparked concerns over a lasting run for inflation. Higher costs for heating homes will bite into consumer wallets at a time when they are also paying more food and many are still struggling from the pandemic’s economic fallout.