Bubble trouble in Europe over CO2 shortage
LONDON Breweries across northern Europe are fretting about shortages of beer, slaughterhouses face possible shutdown and British consumers may find it harder to buy a popular breakfast food — all because of a shortage of carbon dioxide on the continent.
The gas that gives soda its fizz, and is used to package food and even stun pigs before slaughter, is in short supply due to a high number of closures at ammonia plants that produce CO2. That’s pressuring food and drink industries just as warm weather, soccer’s World Cup and the holiday season typically boost demand for fizzy drinks, beer and barbecued meat.
“There is a serious concern that consumers may face a limited choice of food and drink on supermarket shelves if a normal supply of CO2 is not restored as quickly as possible,” said Ian Wright, chief executive of Britain’s Food and Drink Federation.
Carbon dioxide, often associated with global warming, is a byproduct of ammonia produced by the fertilizer industry. When puffed into packaging, it helps prolong the shelf life of meat or salads, and is also used in dry ice, which helps transport frozen goods. The shortage has been caused by too many ammonia plants closing down for planned maintenance or production issues.
It could be September before more ammonia, and with it CO2, comes back to the market, according to CRU’s Fertilizer Week publication. A supply squeeze for another three or four weeks may cause more considerable problems for the food and drink industry, Berenberg Bank analysts said last week.
Northwest Europe has been particularly affected. Norway’s Aass Brewery halted operations and German brewer Radeberger Gruppe has been forced to carefully manage gas supplies, while others have also warned of low CO2 supplies. The city of Oslo has even restricted watering of gardens due to the shortage of the gas used by utilities to treat water.
“It’s quite unprecedented and quite unique,” said Francois Sonneville, a beverages analyst at Rabobank in London.
The U.K., which imports the majority of the CO2 it uses, has been among the hardest hit. Coca-Cola European Partners Plc temporarily paused some production lines, while online supermarket Ocado Group Plc was forced to limit deliveries of some frozen items. Warburtons, a family baking business that uses the gas in packaging, cut back on production of crumpets, a pancake-like griddle cake often eaten in Britain.
Still, the shortage is probably temporary and shouldn’t have any material impact on the performance of credit-rated companies including Carlsberg A/S, Anheuser-Busch In-Bev NV or Coca-Cola European Partners, Fitch Ratings Ltd. said in a note. JD Wetherspoon Plc, a U.K. pub chain that was forced to stop serving some drinks, said the problem is almost resolved.
The crisis could cause potential problems for farmers if they can’t sell their produce, the U.K.’s National Farmers Union said. Reduced slaughtering capacity could force more pigs to be moved to other plants, or for birds to be held on farms for longer, industry groups have warned. Some chicken processors have resorted to electrical stunning and some meat producers switched to other gases or using a vacuum to package their products.