A surge in gas prices globally has led to the closure of two of the UK’s largest fertiliser plants, sparking supply fears in the food industry.
Record energy costs are affecting countries across Europe, leading some nations to impose emergency measures to cap prices.
Experts have warned there is a “real risk” gas supplies in Europe could run out.
“Storage stocks are at record lows and there isn’t currently any spare supply capacity that is exportable anywhere in the world,” said James Huckstepp, manager for EMEA gas analytics at S&P Global Platts.
“This is a real risk.”
In the UK, the rising costs have led to fertiliser firm CF Industries Holdings closing two of its sites in the north of England, in Teesside and Cheshire.
The sites are responsible for 40 per cent of the UK fertiliser market, raising fears there could be a shortage of ammonium nitrate which would hit the food industry.
On Friday, Norwegian fertiliser producer Yara International ASA, which generates a third of the world’s ammonia which is used in fertilisers warned that by next week it will also have curtailed about 40 per cent of its European ammonia output capacity.
It said production will be curbed at plants in the UK, the Netherlands, Germany, Norway, Italy, France and Belgium.
As well as gas costs curbing output of fertilisers, which are crucial to the food industry for its crops, plant closures could further tighten supplies of carbon dioxide, which is produced as a by-product.
The gas is used to stun poultry and pigs and is used in packaging to extend the shelf life of products such as meat and vegetables.
“It’s quite alarming really,” said Nick Allen, head of the British Meat Processors Association.
“We’re talking between days and weeks from this really hitting hard, unless somewhere in the world - ideally here in Europe - there are supplies of this that can replace that amount of CO2 very quickly.”
Tom Bradshaw, vice-president of the National Farmers’ Union, told the Financial Times that the market has been “incredibly volatile” and is presently in “disarray”.
Gas prices are now 50 per cent higher than last year and are reaching record levels in Europe.
Amrik Bal, director of the Energy Intensive Users Group, told The National the UK government needs to take “urgent” steps to address the crisis.
“These announcements should concern everyone and the government must recognise the emergency and take immediate steps to ensure UK industries are not further impacted,” he said.
“The UK needs to take steps to mitigate the recent surge.”
Spain and Greece have taken emergency steps to cap prices and the issue is dominating the coming election in Germany.
The UK's energy watchdog Ofgem said it understood that “the current situation with gas prices is putting pressure on customers”, and that it remained “committed to continuing to work closely with industry through the period ahead”.
European gas stocks were left low following extended cold weather last winter.
The UK has also suffered a further blow after one of its biggest power cables responsible for importing electricity from France was forced to close this week until next March, due to a fire at a converter station in Kent.
It means the UK will be forced to rely more heavily on gas-fired power plants, which could increase the pressure on gas supplies.
This week the UK's regulator approved a 12 per cent price increase for gas and electricity bills to start next month and officials in Italy said that prices will increase 40 per cent for the quarter that will be billed in October.
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
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Who is Allegra Stratton?
- Previously worked at The Guardian, BBC’s Newsnight programme and ITV News
- Took up a public relations role for Chancellor Rishi Sunak in April 2020
- In October 2020 she was hired to lead No 10’s planned daily televised press briefings
- The idea was later scrapped and she was appointed spokeswoman for Cop26
- Ms Stratton, 41, is married to James Forsyth, the political editor of The Spectator
- She has strong connections to the Conservative establishment
- Mr Sunak served as best man at her 2011 wedding to Mr Forsyth
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Avatar: Fire and Ash
Director: James Cameron
Starring: Sam Worthington, Sigourney Weaver, Zoe Saldana
Rating: 4.5/5
Scoreline
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Werner 9', Sane 19'
Netherlands 2
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Our legal columnist
Name: Yousef Al Bahar
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
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The specs
Price, base / as tested Dh960,000
Engine 3.9L twin-turbo V8
Transmission Seven-speed dual-clutch automatic
Power 661hp @8,000rpm
Torque 760Nm @ 3,000rpm
Fuel economy, combined 11.4L / 100k
