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Energy Price Hike Could Force European Steelmakers to a Shutdown
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2022-10-12
European steelmakers could be forced to reduce production and even shut down certain plants due to soaring energy prices. Some of them warned of a potential permanent shutdown. As Germany is most dependent on Russia's natural gas, its steel industry is confronted with additional 10 billion euros of energy cost equivalent to one fourth of the steel industry's average annual revenue. German Steel Federation president Hans Juergen Kerkhoff thinks that without an immediate reaction, the steel industry could be forced to shut down in winter, leading to industrial decline and posing a threat to the German economy.
ThyssenKrupp Steel Europe AG has reduced production in Germany because of the potential decline which affects demand as well as the surging energy price which impacts the company's international competitiveness. ArcelorMittal, the world's second largest steel company, has left its steel facilities in Germany and other countries idle and its production in Europe in the fourth quarter is expected to drop 17%.
Eurofer pointed out that if the energy crisis cannot be dealt with in the near term, the industry could temporarily stretch the time frame of production halt. The metals and other energy-intensive industries could face the same predicament. Aperam, the Belgiam stainless steel manufacturer, is forced to halt production for paying each month for an equivalent of last year's whole expense. Bernard Hallemans, responsible for the European business of Aperam, said the company used to have 80% of its capacity running during annual maintenance in summer, but this capacity has been down to 50% after Russia cut down natural gas supply at the end of June and drove energy prices to new heights.
The industry is forced to halt production as a response but it can't go like this forever. Otherwise, Europe would be de-industrialized and its basic metals supply would have to rely on imports. However, its primary source, Asia, has increased carbon footprints from 20%-25% in 2020 to 40% in 2021. Hallemans said Europe is strict about carbon emission and relevant issues must be resolved. Otherwise, it will make matters worse for the European economy.
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