Ineos closes chemical plants in Britain due to high gas prices

The giant industrial group Ineos found itself facing two bitter choices: continuing to bear record energy costs, or closing factories considered among the most efficient in Europe. It chose the latter, in a move that threatens the country's strategic chemicals industry.

The company confirmed that gas prices in Britain are 12 times higher than in the United States, and eight times more expensive than the coal-based operations used by Chinese competitors.

British billionaire Sir Jim Ratcliffe, owner of the group, explained that he was forced to idle some of the most efficient plants in Europe, but with gas prices now 12 times their level in the United States and 8 times their level in China, we cannot compete.

He told the BBC last week that he had lost confidence in the United Kingdom, and described the country as "in decline."

It is noteworthy that “Ineos Acetyls”, which is part of the “Ineos” group, the only European producer of key chemicals used in a wide range of food and pharmaceutical products in addition to the manufacture of explosives, will be deactivated. Gas is a major component of production.

Two factories at the site have already been shut down, and a third will follow in the coming days.

One factory also produces acetic acid, which is used in vinegar, paint and glue. Another produces acetic anhydride, a major component of aspirin, and triethyl acetate, which is used as a solvent and to remove caffeine from tea and coffee.

Russian energy boycott and its consequences

Fuel prices have begun to rise sharply since Britain boycotted Russian energy imports with the start of the Russian military operation in Ukraine in February 2022. The United Kingdom imposed a ban on imports of Russian oil and petroleum products from December 2022, followed by a ban on Russian gas imports on January 1, 2023.

According to a British House of Commons report issued in June 2022, Russia provided about 4% of the gas used in the United Kingdom, 9% of oil, and 27% of coal. But even with this low percentage of direct adoption, the impact on prices was significant.

The sharp rise in energy prices is due to the fact that the European gas market operates as a single unit. Europe was dependent on Russian gas for up to 40% of its imports, and when Russian supplies to the continent were reduced, gas prices rose in the Dutch TTF Center, which is the reference price at which all gas shipments in Europe are priced, including British imports from Norway, Qatar, and the United States.

Cornwall Insight analysis suggests that switching to liquefied natural gas, which has become the main source of offsetting Russian supplies, is “structurally more expensive” than Russian pipelines, meaning that energy prices in Britain are “unlikely to return to pre-war levels”.

The crisis was exacerbated by the war in the Gulf

The severity of the energy crisis has doubled recently after the US-Israeli war in Iran and the closure of the Strait of Hormuz, which led to an additional rise in gas prices in Europe and Britain. The BBC reported that the wholesale price of gas in Britain exceeded 185 pence per thermal unit, which is the highest level since late 2022, when prices were at the peak of the shock resulting from the war in Ukraine.

The wholesale price of natural gas, used to heat homes and generate electricity, has almost doubled in the UK and Europe since last July.