Markets rally as Evergrande fears ease; CO2 restart to cost ‘tens of

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Britain has reached agreement to get carbon dioxide pumping again, but it won’t be cheap.

Overnight, the UK struck a deal with CF Industries to get the American company to restart the production of carbon dioxide (CO₂) at two fertiliser plants, addressing a crisis that threatened to disrupt the food industry.

It will see the government provide “limited financial support” for CF Fertilisers’ operating costs for three weeks while the CO₂ market adapts to global gas prices.

And the bill is expected to run into tens of millions of pounds, Environment Secretary George Eustice said this morning.

He told Sky News:

“It’s going to be into many millions, possibly the tens of millions but it’s to underpin some of those fixed costs.

They’re big costly plants”

“We need the market to adjust, the food industry knows there’s going to be a sharp rise in the cost of carbon dioxide,”

Eustice added that if the government had not acted, then there would have been food supply problems (producers have been warning that consumers would soon see shortages otherwise) and animal welfare issues.

You’d have lots of chickens on farms that couldn’t be slaughtered on time, and would have to be probably euthanized on farms, we’d have a similar situation with pigs, so there would have been a real animal welfare challenge here, and a big disruption to the food supply chain, so we felt we needed to act.”

But the food industry also faces sharply higher carbon dioxide prices, he added:

“We need the market to adjust, the food industry knows there’s going to be a sharp rise in the cost of carbon dioxide,”

Also coming up today

The financial markets are focused on the debt crisis at China’s property group Evergrande, which faces crunch bond repayments this week.

Overnight, Evergrande said it had agreed a deal with domestic bondholders, who are due a coupon worth around $35.9m (£26.3m).

That has calmed some fears that the company could collapse, sending shockwaves through China’s property sector, and beyond.

But, there was no mention of its plans for a $83.5m interest payment on an overseas bond that is also due on Thursday.

China’s central bank also scrambled into action, injecting 120 billion yuan (£13.6bn) into the banking system to strengthen the financial system amid concerns over the debt crisis at Evergrande.

This has reassured investors — helping China’s CSI 300 index to recover from steep early losses as it reopened after a holiday (it’s now down just 0.7% today).

Reuters explains:

China Evergrande Group’s main unit said on Wednesday it would make a coupon payment on its domestic bonds on Sept. 23, offering some relief to jittery markets…