Page 27 - bne monthly magazine October 2022

bne October 2022 Cover Story I 27
With energy prices at decade- long highs, Europe’s most energy-intensive companies have begun to shut down. Dozens of plants across a diverse range of indus- tries such as steel, aluminium, fertilis- ers and the power industry itself have been forced to close up shop as sky-high gas and power prices make their busi- nesses lossmaking.
The shortage of gas has already prompted talk of energy rationing crippling industry, but for the most energy-intensive sectors things have already gone beyond that; costs have risen so high they are no longer profitable and have to close down.
That gutting of Europe’s heavy industry is already weighing on the economies of the region and economists are predicting that the EU is about to go into a deep recession.
“Sky-high gas prices and aggressive monetary policy tightening have pushed the global economy to the brink of a late 2022/early 2023 recession – defined as two quarters of falling per capita GDP. We expect a global recession to be avoided, but a sustained and substantial improve- ment in growth also seems unlikely,” Oxford Economics said in a note.
The closures could do long-term damage to Europe’s industrial base.
World: GDP
In Germany, Europe’s industrial powerhouse, the most energy-intensive industries are already being hit
hard by unsustainable costs: energy accounts for 26% of the metallurgy industry costs; 19% of basic chemical production; 18% of glass manufacture; 17% for paper; and 15% of construction materials, according to Destatis. European carmakers have already begun hoarding windscreens in anticipation of a glass shortage in the months to come.
Over half of Europe’s aluminium smelters have already been affected
by the power crises. The EU has temporarily lost 650,000 tonnes of primary aluminium capacity, or about 30% of its total, Eurometaux said. Some of Europe’s biggest steel and chemical plants have also been taken offline
and there is no clear idea of when
they can start up again. And Europe's fertiliser industry association says more than 70% of the continent's fertiliser production has been either shut or slowed due to sky-high gas prices.
As bne IntelliNews reported, after over seven months of war, commodity prices across the board have begun to fall in the last few weeks, but even as they come off their panic peaks the prices
of things like gas and power remain double or treble their normal levels.
Steel
Producers of the metal from Spain to Germany are beginning to slow down or entirely stop their output as the higher costs make production unsustainable, even with steel trading near record levels. So far, more than 3mn tonnes
of annual capacity are already being affected by sharply rising costs, reports Steel News.
At the start of September India’s Arce- lorMittal, one of the largest steelmakers in the world, said it was planning to close two of its plants in Germany amid soaring electricity costs.
Construction steel is typically made in power-intensive electric furnaces that have been hit hard by the record power prices in Europe.
Many mills using electric-arc furnaces are now loss-making. Plants using coal- fired blast furnaces will be less badly affected, say experts, as power makes up a lower proportion of their costs.
Other big steel mills in the firing line are Acerinox SA, Salzgitter AG and Liberty Steel. Spain’s Acerinox has already partially closed one plant in Cadiz, where a stainless steel mill has halted but other hot and cold rolling lines are still working. The company has also furloughed 1,800 workers, 85% of its workforce.
In Germany, Salzgitter reduced its melt- ing operations at its Peine plant and UK producer Liberty Steel stopped produc- tion at its Rotherham mill earlier than expected, reported Bloomberg.
Spanish Celsa Group’s furnaces at its Barcelona plant were halted last month, while Megasa SA also idled two facili- ties in the northern region of Galicia, according to Bloomberg. ArcelorMittal has closed its Spanish plan at Sestao, which will not resume working as previ- ously planned on March 13 due to high electricity costs.
Already at the beginning of August, the Belgian Aperam mill in Genk was closed and production at the Châtelet mill has been reduced.
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