For some time now, industrial companies have been struggling with sky-high gas prices. Prices have now risen to such an extent that various parties in both the Netherlands and abroad are shutting down production. Think of fertiliser producer Yara Sluiskil, but also aluminium producer Damco Aluminium Delfzijl (ALDEL) and zinc products Nyrstar.
Gas prices have risen sharply in recent times. This is partly due to Russia, which almost halved gas supplies to EU countries in recent months for geopolitical reasons. The Netherlands' dependence on Russian gas fell by about half in May compared to the previous three years (from 16 to 8 per cent). Looking at the EU as a whole, however, dependence was significantly higher at 24 per cent in May. The shortage of Russian gas is leading to higher gas prices, something that also greatly affects the Netherlands.
Problems at several companies
The high prices are causing problems at several companies. One example is ALDEL. The company immediately shut down aluminium production in Delfzijl last Thursday. The reason was high energy prices; aluminium production consumes a lot of energy. The management argues that temporarily stopping production is the only option. Among other things, it points to high energy prices and the lack of government support. ALDEL already curbed production of liquid aluminium last year.
However, think also of Nyrstar. The zinc producer stopped production as of 1 September. The company does not explicitly cite high energy prices as the reason for this, by the way. However, a source reported to Reuters back in August that Nyrstar's electricity costs had increased tenfold.
Also less ammonia production
Another example is fertiliser producer Yara Sluiskil. The company recently reported that it cannot rule out that its latest ammonia plant in Zeeland will also have to temporarily close its doors because of the high gas price. The company previously closed a small and large ammonia plant along the canal from Ghent to Terneuzen. Incidentally, this does not mean that Yara Sluiskil is also shutting down fertiliser production. This production can continue, with the company using imported ammonia.
Supermarket Picnic has also been hit by high gas prices. The online supermarket can no longer obtain dry ice due to the high gas prices. The company uses this dry ice to cool frozen products. Products like pizzas, frozen meals and ice creams are therefore temporarily unavailable at the super. The shortage of dry ice is linked to the closure of Yara's Sluiskil plant. With a residual product from the production of fertiliser, Nippon from Vlaardingen used to produce dry ice. However, due to the closure, this residual product is no longer available, which also caused a shortage of dry ice.
Problems abroad as well
The problems caused by high energy prices are not limited to the Netherlands, by the way. The sky-high prices are also leading to closures and production stops in neighbouring countries. For example, ArcelorMittal announced on Friday that it would temporarily halt production at plants in Bremen, Germany. On Thursday, the company already announced a similar move for a Spanish steel plant. This while the demand for steel actually reached record highs in recent months.
One example from Belgium is Ploegsteert, a manufacturer of bricks. The company is laying down two of its three brick kilns alternately. This leaves a maximum of two kilns running simultaneously. In this way, the company wants to reduce energy costs. The company was previously forced to implement several price increases. However, Ploegsteert claims that passing on the higher cost prices in time in its sales prices is no longer possible.
Stainless steel producer Aperam is also forced to take measures. The Belgian company is temporarily halting operations at its Genk plant due to high energy costs. The company warns that there are no signs of improvements and the situation could actually worsen in the coming weeks or months. Genk is Aperam's largest production facility.
Shortages will not disappear in the short term
Rabobank analysts predict that the shortages will not disappear in the short term. On the positive side, gas reserves in the Netherlands are currently much higher than last year. In a normal winter, the Netherlands can get through the winter using these gas reserves. Even if Russia turns off the gas tap completely. In this case, solidarity mechanisms may require the Netherlands to supply gas to other EU countries facing imminent gas shortages with which the Netherlands shares a gas network.
But will we get a harsh winter? If so, Rabobank expects that shortages could also occur in the Netherlands and gas consumption in our country will have to fall further. "Although the risk of physical gas shortages is small, we do not assume that gas and electricity prices will start falling in the short term. This is gradually creating more and more frictions in the Dutch economy," Rabobank writes.
Rabobank also warns that energy-intensive companies may be forced to scale down production due to high gas and electricity prices. Thus, this is now already the case. "Production loss in an energy-intensive sector also causes economic damage in related sectors. For instance, a production shock in chemicals will also be felt in the rubber and plastic product industry and the furniture industry," Rabobank reports.
By: Wouter Hoeffnagel
