European energy-consuming industries are facing enormous pressures with the sharp rise in gas and electricity prices, and are calling on heads of government, who are holding a meeting in Brussels on Friday, to take measures to help them face the “explosion of prices beyond the limits of logic.”
Leading Dutch refining company Nirstar said last week that it would cut production “up to 50 percent” at three European plants in the Netherlands, Belgium and France due to very high energy and carbon prices in Europe.She explained that with the “major increases in the cost of electricity during the past weeks” and the high price of carbon in the European market, “it has become economically unprofitable to exploit the factories to their full potential.”
30 km from Van in France, Jacques Bideau, president of PCF Sciences Live, a medium and small business that employs 200 people and produces amino acids from poultry feathers, said he was facing an “unprecedented” crisis.
He added that the price of gas used to produce the heat necessary for hydrolysis of keratin in feathers “has increased 4.5 times since January 2020,” while the price of electricity has doubled “2.5 times.”
However, Beidou, who daily monitors the “Big Noor 2022” index of wholesale gas prices, confirms, “We are not in a dilemma.”
His company, the only one active in this sector in Europe, can increase production costs of 20% in six months on the shoulders of its customers.
The same applies to the giant industrial gas company Air Liquide, which protects itself from price fluctuations by signing contracts that put the costs of goods and services used at the expense of its customers, who are major companies.
Nicolas de Warren, head of the Confederation of Energy Efficient Industries in France, pointed out that “transferring the burdens of high costs on customers is not possible unless you are a leader in a particular market, one of those who set prices.”
Those who don’t have this option “could suffer damage,” de Warren said, adding, “Either you sell at a loss, or you risk losing some market share” in the face of imported products from America or Asia.
This has had a serious impact, for example, on the company “Aluminium Dunkirk”, one of the largest aluminum producers in Europe.
“Aluminium prices have gone up a lot on the London Metal Exchange, but much less than the price of electricity,” factory president Guillaume de Guise told AFP.
He continued, “The share of electricity in our production costs has increased to 40% after it was 25% in the past years, which means that it has almost doubled.”
He fears that he will have to reduce production capacities in early 2022 “if concrete measures are not taken on the energy front” to help European industrialists.
He pointed out that industrialists in Russia benefit from a controlled price of gas, “approximately 5 euros per megawatt hour, while we buy it at more than 100 euros per megawatt hour.”
The associations that represent the basic industries in Europe issued a warning, considering that the recovery of European industry after the Corona crisis is “in danger,” as well as its ability to “achieve its climate goals.”
As the leaders of the 27 countries hold a summit on Friday in Brussels, industrialists in the sectors of chemistry, paper, ceramics, aluminium, clay and glass asked the European Union to put in place “regulations for government aid to allow member states to move more clearly than is allowed today during periods of tension in energy market.
They also called on the bloc to “use its full commercial and diplomatic pressure on major gas suppliers” such as Russia.
In a situation that seemed like a response to these demands, Russian President Vladimir Putin criticized, on the “NS2” television network, the “philosophy of the European Commission”, which believes that energy markets “can be controlled in the stock market, in the spot market.”
He considered that “what we see today in the energy markets is an expression of capitalism that no longer works in a meaningful way,” adding, “They wanted to convince us of the need to abandon long-term contracts.”