11 European Industry Associations Warn: Energy Prices Are Too High To Bear

Due to natural gas shortages, nuclear power interruptions, declining wind power generation and cold weather pushing up prices, Europe's energy crisis has become more serious this week. 11 industry associations including iron and steel, fertilizer, cement, and paper have jointly warned that energy prices are unbearably high, and many industrial companies have to cut production or even stop production.

European natural gas prices hit a record high

This week’s “Black” Tuesday, the prices of natural gas futures in continental Europe and the United Kingdom both rose more than 20%. Among them, the TTF benchmark Dutch natural gas futures in continental Europe closed at 182 euros/MWh, a record high. In the same day, the wholesale price of natural gas in the UK also set a record, reaching 451.72 pence/kcal.

Low temperatures throughout Europe, low natural gas supplies in Russia, and low wind power generation in Germany, all these factors combined to push natural gas prices in Europe and the United Kingdom to a new record on Tuesday.

At the same time, data from Gascade, the operator of the German natural gas transmission system, shows that the flow of natural gas westward through the Yamal-Europe pipeline has been declining since last Saturday.

One quarter of the EU's energy structure comes from natural gas, and the annual demand for natural gas reaches 480 billion cubic meters. Russia is its largest source of natural gas, accounting for 43% of EU imports. The Yamal-Europe pipeline spans the territories of Russia, Belarus, Poland and Germany, with a gas transmission capacity of 33 billion cubic meters per year, and its transmission volume accounts for more than 1/6 of Russia’s total natural gas transmission to Europe.

According to Reuters, the news that the Yamal-Europe pipeline has reduced flow has added to the bullish factors in the natural gas market. According to James Waddell, head of European natural gas at Energy Aspects, a British consulting firm, “Europe has very little storage buffers this winter, so Europe is more dependent on imports than in previous years.”

With the beginning of winter in the northern hemisphere, this continent will be at the mercy of nature.

In the next few weeks, 30% of France's nuclear power capacity will be shut down, and the price of the French electricity contract will soar by 26% due to the nuclear power shutdown.

Another problem that emerged this week is that the power generation of thousands of wind turbines in Germany has fallen to a five-week low due to cold weather putting pressure on the grid.

Due to grid tensions, electricity prices in Germany have risen by 30%, reaching a record high of 431.98 euros per MWh.

It seems that the European energy crisis may get worse because the cold weather is expected to continue in the coming weeks.

11 industry associations warn: energy prices are unbearably high

The European energy crisis is raging, and the manufacturing industry has no choice but to stand at the forefront of the storm and resist tenaciously, but it is very likely that it will soon be unable to withstand it.

This Wednesday (December 22), 11 industry associations including steel, fertilizer, cement, paper and other industries jointly issued a statement warning that EU leaders quickly responded to the exponential rise in energy prices, and prices are now so high. People can't stand it.

The statement stated that the energy crisis hit most European countries. In recent months, energy prices have increased by 4 to 5 times, reaching even higher levels in the past few days. At the same time, carbon prices have tripled since the beginning of the year.

The main reasons for the above situation are speculation in the financial market, imbalances in the natural gas market, seasonal reductions in renewable energy production, reduction in nuclear energy production, coal mine closures, and increased carbon costs passed on to electricity prices.

11 industry associations warned that high energy prices have forced many industrial companies to cut production or even temporarily close factories

For example, the "energy-consuming giant" aluminum smelters have been forced to reduce production. According to local media reports, the largest aluminum smelter in Europe, Dunkirk Aluminum in France, has restricted production in the past two weeks.

Romania’s largest fertilizer producer Azomures recently stated that its production facilities have begun to close, and farmers will not be able to afford such high fertilizer prices.

Yara International, a Norwegian fertilizer producer that cut production earlier this year, said it will continue to monitor the situation closely and reduce production if necessary.

The statement warned that the current situation has severely affected the competitiveness and profitability of European energy-intensive companies, because they are most vulnerable to sharp price increases. Therefore, long-term unbearably high energy prices can lead to serious losses, the relocation of European companies, and an increase in carbon leakage.

Natural gas is used for power generation, and it can also be used directly to make fertilizers and plastics. Although most large companies have signed long-term supply contracts, there is growing concern that continued price increases may weaken the competitiveness of companies.

11 industry associations called on European leaders to actively respond to the energy crisis and quickly use the "toolbox" proposed by the EU in October this year, and when necessary, urgent actions should be taken to help European industries overcome difficulties.

U.S. natural gas ships heading to Asia turn to Europe

After European natural gas prices broke a record high, the US Liquefied Natural Gas (LNG) ship unexpectedly turned around and headed for Europe on its way to Asia. Because for American natural gas traders, prices in the European market are more profitable.

According to Bloomberg estimates, European prices are now about US$24 per million British thermal units higher than benchmark LNG prices in Asia. At least ten LNG cargoes have been transferred from Asia to Europe.

The U.S. natural gas price has nearly halved recently, and the spread of natural gas futures between the U.S. and Europe is also expanding. On Tuesday, the benchmark Dutch natural gas futures price was nearly US$52.9 per million British heat higher than the US contract.

According to shipping data, there are at least 30 ships carrying liquefied natural gas from the United States to Europe. Among them, 10 LNG ships from the United States have declared Europe as their destination, while another 20 cargoes appear to be traveling across the Atlantic Ocean to Europe.

Although natural gas prices in Europe and the United Kingdom have both corrected after the madness on Tuesday, it is still difficult to change their historically high prices.