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CO2 shortage in 2022: A threat to food, beverage, and healthcare

Major disruptions in CO2 supplies leave producers short-stocked, particularly in Europe, disrupting food making, beverages, and healthcare.

Why is there a CO2 shortage?

Major disruptions in CO2 supplies have left producers short-stocked in recent months, particularly in Europe. There, the intensifying energy crisis caused by the Ukraine war and sanctions against Russia has boosted energy costs to unprecedented heights over the past seven months.

Skyrocketing energy costs have led once-stable fertilizer plants to cut production, and in some cases to shut down altogether for prolonged periods of time. So far, production impacts have been reported at some of the continent’s largest fertilizer plants, including at key manufacturers CF Industries and Yara International. Fertilizer plants create CO2 as a by-product of synthesis gas production, namely in the manufacturing of ammonia and hydrogen gases.

Other disruptive events coincided with energy-related production halts on the continent, including needed maintenance work at plants in Europe and contamination issues at plants in other parts of the world, blocking those plants from replacing missing supply from Europe.

These concurring disruptions highlight how quickly gas shortages can hit industries relying on stable CO2 supplies, particularly food, beverage, and healthcare. With the energy crisis likely to continue as the region heads into the colder months of fall and winter, further CO2 supply disruptions should be anticipated in the months to come.

Rising energy costs impact several CO2 producers

Initial production impacts started in Ukraine, with the Odesa Port Plant shutting chemical production in February and extending its stoppage due to high gas prices, effectively halting yearly volumes of around one million tons of ammonia and 800 thousand tons of urea. The impacts of the invasion did not stay in Ukraine, however, as Russia’s curtailment of gas caused European producers to wind down production in recent months.

The trickle-down effect of falling CO2 volumes to distributors caused disruptions across various sectors, most notably in food making, beverage, and healthcare.

CO2 supply shortages disrupt regional meat production

CO2 is used for various food-making processes, including the transit of frozen goods, stunning of animals at slaughterhouses and surface sanitization processes. The British Meat Processors Association claimed in mid-September that supply issues would severely impact the industry for at least the next 4-6 weeks due to multiple production stoppages.

Amid a deteriorating supply situation, two of the country’s largest food have called on the British government to cap the price of the gas to shield manufacturers from the worst impacts.

CO2 costs have increased during the energy crisis, with reports that meat processors are switching to electricity instead of CO2 to stun animals to save costs. The alarm has been echoed across Europe, with calls for governments to prioritize meat production moving into a winter of uncertain natural gas supplies on the continent. Although some governments appear willing to support struggling companies, these measures are only temporary solutions that do not fix the underlying reasons for the crisis.

Beverage makers adapt to sparser CO2 deliveries

Mineral water bottlers, alcohol breweries and other beverage companies can’t operate without a steady supply of CO2. Nestle-owned San Pellegrino S.p.A. has halted production at its Bergamo plant in Italy twice already this summer. Another Italian producer, Acqua Sant’Anna, announced cutbacks at all soft drink production lines in early August, with no indications for how long or how severe the cuts may be.

Similarly, water suppliers and breweries in Poland, the United Kingdom, and Germany are facing similar cuts. Some now depend on imports to keep production stable, while others have de-prioritized less profitable products to continue producing others.

A bar chart showing Production Disruptions (on y-axis, from 0-40) over several months (on x-axis, from March to October 2022) because of the CO2 shortage.
Figure 1: Energy-related factory shutdowns in Europe across all manufacturing sectors, 2022 (source: Everstream Analytics)

Healthcare sector at risk of disruptions amid tightening supply of CO2

CO2 is a primary input for dry ice, often used to transport vaccines and other temperature-sensitive medicines. The gas is also used for blast cleaning, a way to clean medical equipment efficiently. As a liquified gas, purified medical CO2 is also used for laparoscopies, endoscopies, arthroscopies, and other operations.

For the time being, distributors are prioritizing customers operating in the medical sector. However, as supply continues to tighten, concerning shortages could also emerge in the medical sector.

CO2 supply shortage unlikely to improve as energy crisis in Europe continues

As the political and economic conflict between Russia and many of its European neighbors continues unabated, the supply of CO2 will likely remain at risk of further disruptions in the weeks and months to come, with manufacturers facing record-breaking energy prices that may force them to further curtail production processes in response to climbing costs.

Shortages extend to other parts of the world including the Pacific and North America. CO2 shortages forced food manufacturers in New Zealand’s poultry industry to cut production significantly as early as June of this year.

Alleged contaminants in the U.S.’s largest CO2 deposit in Jackson Dome, Mississippi have reduced deliveries the past two to three months. Jackson Dome supplies major customers in the U.S., Mexico, and Canada, where decreased volumes will squeeze affected sectors into the fall.

With supply issues in North America lingering, it seems increasingly unlikely that manufacturers in Europe will be able to sufficiently compensate for regional shortfalls in supply by shifting to suppliers in other parts of the world.

Everstream clients are receiving more detailed insights and recommendations about this risk.

Contact us to learn how we can give you a complete view of the risks affecting your end-to-end supply chain and what you can do to mitigate them.

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