Financial Times Seeks To Know, ‘Will the Energy Crisis Crush European Industry?’

Oct. 21, 2022 (EIRNS)—Under that headline, the City of London’s daily Financial Times has put together an impressive report on how industry throughout Europe is hit by the energy crisis and is threatened with extinction. The FT feature is partly based on a report annexed to a letter sent by the European Round Table of Industry to the EU Commission, which shows the dramatic situation of European high-intensity energy sectors.

According to an annex in the Oct. 7 report: “European Industrial Competitiveness Facing an Existential Crisis”: “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%. Recently, another European aluminum production capacity, namely the Slovalco aluminum plant in Slovakia, had to close.

“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. The steel market will shrink as not all downstream activities would be covered by CBAM . This could result in significant additional inflation due to increased steel prices. Furthermore, new market entrants from outside of the EU will sell their (carbon-intensive) steel on the EU market as CBAM could be circumvented or absorbed by many importers.

“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, exacerbating an ongoing erosion of European production: indeed, EU cement imports have increased by 300% in five years, a trend that has accelerated in the first three months of 2022 (+47% year on year).

“Glass: The production of glass is intensive in gas consumption and the only possible substitute is heavy fuel which has more environmental consequences. An industrial effort to lower emissions has been made in the past years by switching from fuel to gas. Since March, the glass industry has been warning about the high gas prices, and the cost of glass production in Europe is now 3 to 5 times more expensive than in neighboring countries (Algeria, Egypt, Belarus). The first company, Duralex, announced that it will stop its production next winter due to the cost of energy. It takes a long time to re-open a production once it had to close. There is a high risk of definitive plant closures in the EU.”

The ERT timidly criticizes the Green Deal but sticks to 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 ‘RePower EU’ package aims to accelerate decarbonization, but is not focused enough at preserving the EU’s competitiveness. In the short term, the EU needs to adapt its strategy to support decarbonization in a way that also strengthens and protects its industrial competitiveness.”