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European industry is sagging under the weight of energy prices

European industry is on the brink of toughness as a result of the deepening energy crisis. Electricity and gas prices break new records almost daily, and some energy-intensive companies have temporarily shut down as they become too expensive to operate.

With the coming winter and the increasing need to turn on the heating, the pressure will increase and force the directors of subsequent plants to make difficult decisions. The ammonia-producing company SKW Stickstoffwerke Piesteritz GmbH is one of those that have been forced to take drastic measures. On Tuesday, a German company that consumes 640 gigawatt-hours of natural gas per year, equivalent to around 50,000 households, said it would cut production by 20% to offset rising gas prices.

The problems in the region are the result of the supply crisis, which has been intertwined with the surge in demand after the coronavirus pandemic. This may hinder the economic recovery by increasing the costs of running a business and energy bills in households. It can also significantly raise the inflation rate. Many companies are trying to increase their energy efficiency, but soaring costs consume any profits.

Europe facing the crisis

There is even a risk of direct government intervention, as has happened in China. This could include cutting back on industrial energy use to conserve resources and keep homes warm in winter, especially around Christmas. Dutch gas futures jumped 22.4% on Wednesday and closed the day with a 20% increase on Tuesday.

The longer the crisis lasts, the more likely there will be a total shortage of supplies. German giant BASF SE is already getting ready for this and has signed long-term contracts with multiple gas suppliers to avoid the crisis. The company’s site in Ludwigshafen, the largest chemical plant in Europe, has been recognized by the German grid operator as “systemically important”, meaning that its electricity supply will not be cut off to protect public supply.

Author: Izabela Kamionka

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