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The ongoing semiconductor shortage has certainly caught a wide range of industries off guard. Now, countless European businesses are about to learn another hard lesson in supply chain economics.
A shortage of carbon dioxide — manufactured by fertilizer companies — is already threatening everything from food to nuclear power in the United Kingdom. And on Wednesday, one of the world's largest gas distributors said continental Europe is about to feel the pain, too.
The CO2 crisis in Europe is the result of a pretty straightforward economic domino effect.
Last year, Europe endured a colder and longer winter than usual, leaving natural gas supplies depleted. A subsequent run on supplies has sent wholesale gas prices up 250% this year — including a 70% jump in August alone. Fertilizer plants (a main producer of CO2) rely on natural gas to operate but are now finding it too expensive to procure. Large producer CF Industries shut down two factories last week, but the government swooped in Tuesday with £20 million in immediate aid to keep them running for a fortnight.
A prolonged CO2 shortage would be an economic disaster: meat companies use it to stun chickens and pigs for slaughter, the soft drinks industry taps it to carbonate sparkling beverages, nuclear power plants use it for cooling, and the gas is even utilized in food packaging and medical supplies. And Europe's major suppliers are now warning the CO2 crisis has crossed the English Channel:
- Nippon Gases, which sold $1.5 billion of industrial gases in continental Europe last year, said Wednesday its supplies have fallen 50%. The firm is rationing the limited supply it has to nuclear power, food, and medical companies.
- Norwegian chemicals company Yara, which manufactures fertilizer ingredient ammonia, announced a 40% cut to its European production. Natural gas costs mean the firm is suffering a $300 loss for each ton unit of ammonia sold, making it virtually impossible to do business.
Lights Out: The gas shortage also has several electricity providers on the verge of bankruptcy. Five small energy firms in the UK have already gone bust, and two more representing 3% of the market or 800,000 customers stopped trading Wednesday.
Some Good News: Britain's Business Secretary Kwasi Kwarteng assured the public this week that there's "absolutely no question of the lights going out" in their homes this winter. How reassuring.