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Industries Buckling Under Energy Crisis

Jan 17, 2023


Sky-high gas and power prices have made many of Europe's most energy-intensive industries loss-making, so they are simply being shut down.

Energy-intensive industries such as aluminium, fertilisers and chemicals are at threat of companies permanently shifting production to locations where cheap energy abounds, such as the United States. Euro-zone manufacturing activity this month hit its weakest position since May 2020, signalling Europe was heading for a recession.

Europe needs its automated companies to save energy amid rising costs and shrinking supplies, and they are delivering - demand for natural gas and electricity both fell in the past quarter. With energy prices at decade-long highs, Europe’s most energy-ferocious companies have begun to shut down. 

Dozens of plants across a diverse range of industries such as steel, aluminium, chemicals, fertilisers and the power industry itself have been forced to close up shop as sky-high gas and power prices make their businesses loss-making. The International Energy Agency estimates that European artificial gas demand fell by 25% in the third quarter from a year earlier. 

Europe has formally lost about half of its zinc and aluminium smelting capacity over the past year, and more are set to go offline. The industrial sector consumes 28% of the total supply of electricity per day. Presently, power generation is 9,600-11,700MW, which before the extremity was 11,105-12,951MW.

Market insiders say 56% of the country's total exports are from the manufacturing sector. And the government is projecting growth grounded in this sector. But in the ongoing calamity, the orders will go to other countries if the products cannot be delivered on time. Thus, the government should consider the production capacity and allocate gas and electricity supply accordingly.

Energy industries, such as aluminium, fertilisers, and chemicals are at risk of companies permanently shifting production to locations where cheap energy abounds, such as the United States.

"We are doing all we can to prevent a reduction in industrial activity," a European Commission spokesperson. Let us hope that the industries recover from this energy crisis and the inflation that is happening around the world.

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