European Industry Faces Shrink or Shut Decisions on Energy Pain https://finance.yahoo.com/news/european-industry-faces-shrin…
Europe’s biggest industrial firms have been banking on spring to bring down soaring energy costs. Those hopes faded this week as Russian tanks rolled into Ukraine. Smelters and chemical factories across Europe were already struggling before the invasion sparked another jump in gas and electricity prices. Now, a growing list of companies including Europe’s biggest chemicals maker BASF SE are warning the energy crisis will keep hacking away at their bottom lines for the foreseeable future…
BASF isn’t alone. The energy-intensive metals industry is also struggling. Aluminium Dunkerque Industries France, Europe’s largest aluminum smelter, had planned to ramp up curtailed production after the French government helped shoulder as much as 80% of the cost burden. But the renewed surge in prices following Russia’s invasion of Ukraine has put the plan on ice, a labor union official said…
Companies are asking governments for help. France has already moved to relieve gas costs for consumers and Prime Minister Jean Castex froze gas tariffs in November…Italy has also slashed taxes on gas consumption. Germany, which imports more than half of its natural gas from Russia and has the highest industrial electricity prices in the EU, has yet to step in.
European Industry Faces Shrink or Shut Decisions on Energy Pain
It doesn’t matter if they do not stop Putin’s aggression.
Algeria has offered to help Europe with gas supplies. Germany said they are building 2 new LNG ports. Sure it won’t happen overnight, but until Putin is gone, Europe will be turning to sources other than Russia.
And in European fashion, I imagine the governments will mostly step in and just keep the factories open.
European Industry Faces Shrink or Shut Decisions on Energy Pain — It doesn’t matter if they do not stop Putin’s aggression.
Sure, and if there is a nuclear exchange then it all become moot.
However, this is a problem that predates the current crises, and one they have been wrestling with for some time. High input costs, be it labor or energy, have a tendency to make one uncompetitive.
High input costs, be it labor or energy, have a tendency to make one uncompetitive.
I’m not sure Europe is uncompetitive.
Germany: 2nd largest trade surplus in the world, 4th largest economy
Ireland: 4th largest trade surplus in the world
U.K.: 5th largest economy in the world
France: 6th largest economy in the world
Netherlands: 6th largest trade surplus in the world
Italy: 7th largest trade surplus in the world, 9th largest economy
Spain: 14th largest economy in the world
They have had higher labor and energy costs for many decades.
Fears were compounded after a Eurostat study published on Monday (15 January) found that month-on-month industrial production in the EU fell by 0.2% in November last year, the third consecutive monthly decrease. Year-on-year industrial output was also down 5.8% in November after declining by 5.4% in October.…
Month-on-month production of capital goods such as buildings, machinery, and equipment fell by 0.8% across the bloc in November after dropping by 0.7% in October. Capital goods production was also 8.7% lower in November compared to the same month in 2022.
Here’s a look at manufacturing by country, focusing on the world’s top ten manufacturing countries and what they contribute to the global manufacturing economy.
Note that industrialized countries consistently compete for a place, so this list is likely to change as years go by.
In April 2024, BASF bought 49% of the wind farm project from Vattenfall. Now BASF has sold them back. The company reserves losses of 300 million euros…
After…Ukraine and the energy crisis in Europe, BASF reported a sharp drop in the competitiveness of European industry and announced production cuts at its main production site in Ludwigshafen, Germany. At the same time, the world’s largest chemical giant announced plans to reduce CO2 emissions in production. Obviously, this strategy led to the purchase of a stake in the Nordlicht (Northern Lights) wind farm project, which cost BASF 501 million euros. It is planned that its capacity will be 1.6 GW and the launch will begin in 2026…
It was planned that the main and most unprofitable production site in Ludwigshafen after the energy crisis would receive clean electricity from the Nordlicht project. However, in September last year, BASF announced the launch of the Winning Ways strategy, which assumes that not all customers are willing to pay more for products that are manufactured with minimal CO2 emissions…
“Low market growth rates in Europe, slow recovery in demand, higher gas prices than in other regions, and constant bureaucratic obstacles have significantly burdened the European chemical industry in recent years. This has particularly affected the Ludwigshafen site in Germany, where production volume and profitability have declined significantly,” BASF said in its 2024 report.
High production costs and ageing plants have left European producers struggling, making the region increasingly dependent on imports of primary chemicals such as ethylene and propylene, the building blocks for plastics, pharmaceuticals and countless industrial goods…
The European Commission responded this month with a pledge to support domestic production of chemicals deemed strategic for its industries, such as ethylene and propylene. It plans to expand state aid to modernise plants and require public tenders give preference to goods made in Europe - similar to the EU’s 2023 legislation for metals and minerals. But the move may be too late to reverse the damage…
Most of the planned closures target crackers - a unit that turns hydrocarbons into ethylene, propylene or other primary chemical materials.
A document issued by eight EU countries on petrochemicals in March said that 50,000 jobs could be at risk due to potential closures of more crackers in Europe by 2035. The EU’s plants are mainly small and mid-sized and have been running at an average utilisation rate below 80% - a level considered uneconomical…
While older European plants use naphtha as a raw material, the United States and the Middle East use cheaper feedstocks like ethane — a by-product of shale gas.
As NATO is now in Cold War II, access to cheap Russian energy is over. EU is deindustrializing. And the EU industrial base has been slowing declining since the 1990’s. Its gross value added to the EU economy has shrunk from 20% to 16.5%.
Besides the loss of cheap energy source the high cost of EU labor continues to be a factor as other lower labor cost nations move into high technical and precision manufacturing.Also the EU faces demographic issues that reduce skilled labor numbers.
BASF, LyondellBasell, ExxonMobil, and SABIC, have announced plans to shut down key facilities in various countries, reflecting broader structural challenges.
What are the key pain points that the EU must address to restore its global industrial competitiveness?
High energy prices Little can be done about that.
Rigid regulation: Strict policies are restricting the sector’s ability to adapt in a fast-evolving global market. While China supports both battery electric and plug-in hybrid vehicles (PHEVs), enabling broader market adoption and engineering innovation, Europe has largely sidelined PHEVs and other technology options in its regulatory framework. This narrow focus is drastically limiting consumer choice and slowing industrial momentum. Between 2020 and 2023, China’s EV output surged by over 9 million units – more than triple that of the EU.
Declining investment: Closely tied to these regulatory and energy challenges, Europe is losing its appeal as an investment destination. Non-EU capital is flowing elsewhere, and European firms are retreating from global markets.
EU prospects look dim. And then there is the EU’s demographic issues on top of that.
Ineos is a privately owned multinational chemicals company.
“Decarbonising Europe by deindustrialisation is idiotic,” Sir Jim Ratcliffe said in an open letter to European politicians. “We lose jobs and security and the CO2 simply floats back over Europe anyway.”
INEOS operates one of the largest and most advanced, integrated petrochemical facilities in Europe in Köln.
“The gas bill is €100 million higher than its US equivalent,” said Sir Jim. “The electricity bill is €40 million higher than in the US. And the carbon tax bill is rising towards a shocking €100 million.”…
Over the past century it [the chemical industry] has been hugely important to the success of the European economy, with revenues of about €1 trillion – similar in size to the automotive industry. But Sir Jim warns it is facing extinction due to the cost of energy and carbon taxes.