Associated British Foods (AFB), the multinational food and ingredients group, has said it will shut its 416mn litres/yr Vivergo bioethanol plant near Hull, eastern England, before 13 September unless the UK government agrees to urgent support measures.
The company confirmed that "formal negotiations" with the government are now under way to find a "sustainable solution". But with the outcome uncertain, it has already stopped purchasing wheat feedstocks as of 11 June and begun consultations with staff "to effect an orderly wind-down" once existing contractual obligations are met.
ABF said the government would need to provide "both short-term funding of Vivergo's losses and a longer-term solution" to avoid closure.
The future of the plant "will depend on whether the negotiations deliver a credible route forwards", it said.
The closure threat follows a UK-US trade agreement that removes import tariffs on up to 1.4bn l/yr of US ethanol — roughly equal to total UK demand. Domestic producers say the deal has made the UK market unviable by allowing cheaper US imports to undercut local output.
Paul Kenward — chief executive of ABF Sugar, the division of ABF that includes Vivergo Fuels — told MPs earlier this month that the trade deal effectively hands the UK market to US exporters. He proposed raising the UK's ethanol blending mandate from E10 to E15, saying this would give the industry "room to breathe", and also suggested a support package worth £75mn/yr ($100mn) for up to two years to help the sector adjust.
Vivergo previously told Argus that an E15 mandate could boost demand by 660mn l/yr and highlighted the potential for increased bioethanol use in marine and aviation sectors.
German-owned Ensus, which operates the UK's only other bioethanol plant at Wilton on Teesside, has also warned of potential closure. The firm told Argus that it received a letter from the government's minister for business and trade acknowledging the economic challenges it faces as a direct result of the US trade deal.
Ensus said it welcomed the government's recognition of its request for regulatory changes that could help the UK industry remain viable, along with the need for interim financial support.
