Cheshire chemicals plant set to close with loss of 283 jobs
A chemicals plant near Chester is to close with the loss of 283 jobs, CF Fertilisers UK announced today.
The business, part of US-based CF Industries Holdings, said it will shift production from the Ince site to its sister plant at Billingham, in the North East, which the company said is up to 20% more efficient.
Billingham, on Teesside, is the largest ammonia, ammonium nitrate (AN) and carbon dioxide (CO2) production facility in the country. The Ince manufacturing facility has not produced ammonia since September 2021.
Redundancy consultations will begin with trade union Unite over the job losses, and the company said it believes some of the proposed redundancies might be avoided by redeployment.
The company is also proposing to reduce the maximum employer contribution level for its defined contribution (DC) pension scheme. There are no changes proposed for defined benefit (DB) pension schemes. Bosses also want to discuss “proposed revisions” to current pay and conditions arrangements with Unite.
CF Fertilisers said the proposals are hoped to position the UK business for long term profitability and sustainability and to enable it to continue to supply fertiliser, carbon dioxide and other industrial products to its domestic customers.
The actions are a consequence of rising raw materials prices, the company said.
The cost of producing nitrogen fertilisers is highly dependent on the cost of natural gas, which is the principal raw material and primary fuel source used in the ammonia production process. For many producers globally, more than 70% of the total cost to produce ammonia is from the cost of natural gas.
Natural gas forward curves suggest that nitrogen facilities in the UK and Europe will be the world’s high-cost marginal producers for the foreseeable future, presenting a constant challenge to the sustainability of current operations, said the company.
Operations at both the Billingham and Ince manufacturing facilities were halted in September 2021, due to high natural gas prices that made production at the sites unprofitable.
The Billingham facility was restarted that month following an interim agreement reached with the UK government to cover the costs associated with restarting the ammonia plant to produce CO2 for the UK market, mainly in the food sector.
CF Fertilisers said since September 2021, no redundancies have been made at the business and all CF Fertilisers UK employees have been paid full salaries and bonuses, with payroll-related expenses totalling approximately £35m during that time, several times larger than the Government support provided. Against this backdrop, a strategic review was recently completed that confirmed additional challenges facing the business.
The company’s AN fertiliser sales volumes to domestic customers have fallen by nearly 30% since the 2017-18 season due to intense competition from lower cost imports. As a result, when both plants are producing AN even at minimum levels, the company has not been able to profitably sell the entire volume domestically over the past four years.
This caused the company to increasingly turn to exporting at unsustainably low margins to continue to operate both facilities. As carbon costs continue to increase substantially in the UK, the company expects its production will be placed at an even bigger competitive disadvantage against imports.
CF Fertilisers UK managing director, Brett Nightingale, said: “The people and facilities that make up CF Fertilisers UK are part of a proud, 100-year history of providing customers in the UK with products vital to the country’s food security and industrial activity.
Brett Nightingale
“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 UK is to operate only the Billingham manufacturing facility moving forward while addressing cost pressures throughout our business.”
He added: “We expect to begin collective redundancy consultation with union and other employee representatives shortly. We intend to provide our team with all possible support through what we recognise will be a very challenging time for them.”
CF Fertilisers UK was formed in 2015 following the purchase by CF Industries of the 50% equity interest in GrowHow UK Limited that it did not already.
As of June 1, 2022, CF Fertilisers UK employed 544 staff – 177 at the Billingham manufacturing site, 283 at the Ince manufacturing facility and 84 in corporate functions. Since 2015, CF Industries has invested nearly £200m of capital into CF Fertilisers UK’s manufacturing facilities.
Philip Cox, chief executive of Cheshire and Warrington LEP, said: “We are disappointed to hear that CF Fertilisers is planning to close its plant in Ince. Our priority now must be the employees impacted by this announcement.
“This will be an unsettling time for those affected and our priority is to work with Cheshire West and Chester Council and other partners to ensure the employees get the support they need.”
