Some of Europe’s largest energy consumers are slashing their production, warning that rising energy and gas prices could increase production costs and affect competitiveness, according to the Financial Times, according to Mediafax.
Dunkirk’s Alvance, Europe’s largest aluminum producer, has cut production by almost 4% since early December as disruptions to several nuclear power plants have led to rising electricity prices in France.
Nyrstar, the zinc producer owned by goods trader Trafigura, has said it will close a 150,000-tonne smelter a year in Auby, northern France, after Christmas because of record electricity prices.
The company, which has cut production in three locations in France, Belgium and the Netherlands due to rising energy costs, said it expects high prices to continue.
“Electricity accounts for 35% of our fixed costs, which is huge,” Xavier Constant, the smelter’s director, told France Info radio this week. The closure will last at least two months.
European gas prices have broken new records amid declining Russian imports.
The gas to be delivered to Europe next month, which is already trading at record levels, jumped by more than 20% earlier this week, closing at 181 euros per megawatt hour.
Some British steelmakers are shutting down when electricity prices rise, according to UK Steel.
Bankers said their phones “rang insistently”, with traders requesting additional lines of credit to cover trading positions in natural gas and LNG.
Large commodity traders use derivative instruments to hedge contracts against price fluctuations and to secure margins. This usually involves the sale of futures related to the FTT, the wholesale price of natural gas in Europe.
Gas is used to generate electricity and is used directly to make products such as fertilizers and plastics. Although most large companies have long-term supply contracts, there are growing concerns that a sustained rise in prices could undermine companies’ competitiveness.
In addition to rising energy prices, which have risen four or five times in recent months, companies are facing higher carbon prices, which have tripled since the beginning of the year.
These increases have led some of the largest energy consumers in the EU bloc, including steel, cement and fertilizer producers, to call on governments more often to address the issue of “unbearably high energy prices”.
Jacob Hansen, CEO of Fertilizers Europe, said “politicians have not really understood how serious the situation is.”
“The energy market is not working for Europe …. I’m worried about prices [la gaz] now that many plants have returned to production after maintenance. I think they will think again about what they are doing. “