Rising energy prices in Europe are causing huge losses to the region’s largest gas and electricity consumers. This has forced industrial giants to cut production, threatening the region’s economic recovery. As energy costs rise to new heights day by day, financial tensions for a number of industries, including metals and fertilizers, are rising, Bloomberg reports.
Aluminum Dunkerque Industries France, Europe’s top aluminum producer, has cut production in the past two weeks. Trafigura’s Nyrstar will suspend zinc production in France in early January, and Romanian fertilizer maker Azomures has suspended operations.
Europe has never paid as much for electricity as in 2021. The average price of electricity on the power exchange increase more than 200% in Germany, France, Spain and the United Kingdom. In the Nordic region, where the predominant hydroelectric power generation typically limits price growth, electricity has risen 470%.
Energy-intensive companies in Europe are in bad position because of expensive energy and are trying to get support from national governments, writes The Wall Street Journal. The publication recalls the record gas prices reached before the holidays. Then the natural gas reached a price of 180 euros per megawatt-hour, or $ 2,000 per 1,000 cubic meters. In the following days, trade calmed down slightly, but remained above the level of 100 euros per megawatt-hour.
Many companies can switch to electricity, but this is also not profitable, especially if they do not have long-term contracts. In Spain, for example, this is not a common practice and now businesses have to rely on spot markets for electricity supply. In France and Germany, however, companies are more secured, because of entering into long-term fixed-price contracts.
Expensive energy limits the competitiveness and profitability of energy-intensive production. Companies in the glass, cement, steel and metals and other sectors will record serious losses if this situation continues.