Energy Price Inflation Threatens European Industry With Extinction

An October 7 report published by the European Round Table of Industry and annexed to a letter to the EU Commission shows the dramatic situation of European high-intensity energy sectors. Annex 1 of the report notes that “The ongoing crisis is only partly reflected in statistics, as companies are applying survival strategies, and foregoing long-term competitiveness. The real extent of the damage will be visible over the coming years. Yet, the situation is nowadays already very critical for:

“Aluminum: Production of 1 out of 4 megaton in the EU/EEA [European Union/European Economic Area] has closed in less than a year (including 50% of capacity in the EU itself!), and the same capacity has started up outside of Europe…. Europe has now an import dependency of close to 50%.”

“Steel: Many electro-based steel productions are under severe pressure from the high electricity prices. Aside from the shutdown of the Aperam facility in Genk, Belgium, ArcelorMittal has announced the temporary closure of 5 blast furnaces. Moreover, the only existing direct reduced iron production plant in the EU, in Hamburg, is closed as well. … Lately, many electric arc furnaces are on a stop-and-go modus. In addition, the prospect of the combined effects of the decreasing free allocation [of Carbon Certificates] and CBAM [Carbon Border Adjustment Mechanism] would entail that the EU-based production and jobs linked with exports will largely have to close.” As a result, steel prices will increase and so will imports of “(carbon-intensive) steel”.

“Ammonia: The production of ammonia for the fertilizer sector is rapidly declining. Already in the spring, Yara started curtailing its production in France and Italy. In addition, around 20% of EU-based ammonia production is used to produce intermediate chemicals, many of which are exported.”

“Cement: Current electricity prices have tripled the costs of producing cement in the EU. Combined with significantly increased prices for other energy carriers, this poses a direct threat to cement operations in Europe. Unless urgent actions are taken at both the EU and national levels, plant closures across the EU are inevitable…. EU cement imports have increased by 300% in five years…”

“Glass: The production of glass is intensive in gas consumption and the only possible substitute is heavy fuel which has more environmental consequences….the cost of glass production in Europe is now 3 to 5 times more expensive than in neighboring countries (Algeria, Egypt, Belarus).”

The ERT timidly criticizes the Green Deal but overall defends the decarbonization, climate, etc. targets, stating: “The Green Deal as the new growth strategy of Europe will only be successful if industry is part of this transformation, and if its international competitiveness is not undermined…. the EU needs to adapt its strategy to support decarbonization in a way that also strengthens and protects its industrial competitiveness.”