Rising energy prices in Europe affect not only consumers, writes Oil Price. Growth has also begun to hit the industry, disrupting the post-pandemic recovery of European industries, which are facing declining consumer capacity, declining output and rising operating costs.
Europe’s largest companies, from the chemical and mining giants to food producers, say rising natural gas and electricity prices are threatening their profits and cutting some of them. Some have already closed due to record natural gas prices. Analysts predict that several more companies will temporarily stop working in the coming weeks.
Record prices in the Old Continent are also raising liquefied natural gas prices in Asia.
Abnormally low reserves, weak winds and record prices for carbon emissions have led to rising gas prices on the continent in recent weeks, and electricity prices in large countries have reached record highs. Almost every day, gas and electricity prices rise to new heights, putting pressure on governments amid ongoing public protests against high prices.
The industry is also suffering. CF Industries, a manufacturer of hydrogen and nitrogen products, announced this week that its production facilities in the UK will be suspended due to high natural gas prices. “We don’t know when we will resume work,” the company said.
The Norwegian company Yara, which is one of the largest producers of ammonia in the world, is also reducing its activities – by about 40%, the company said on Friday. German bioethanol producer CropEnergy said operating profit halved in the second quarter of the fiscal year as a result of significant increases in raw material prices and higher energy prices.
BASF, Europe’s largest chemical producer, and Aurubis, a leading copper producer, cited high energy prices as a significant burden.
Perhaps this is just the beginning, especially if the coming winter in Asia and Europe will be colder than usual. The warning also came from Goldman Sachs.
The downturn in the industrial sector is the last thing Europe needs right now, just as the economy began to recover from the pandemic. Growing demand from Asia means that Europe may not be able to get more liquefied natural gas. Spot prices in Asia are at their peak for this time of year, but buyers are not stopping fearing a growing deficit in the winter. “Asia is in a panic over last winter’s bad winter,” said Ogan Kozi, managing director of Integrated Gas Accenture.
Europe’s utilities – and possibly governments – are hoping for a milder and windier winter. Otherwise, the gas deficit will persist at least until the first quarter of 2022.