Companies are turning to goverments for financial support but this would only be temporary, if they are given any at all
The surge in gas and power prices in recent months has put increasing pressure on European energy-intensive industry, leading some fertiliser and metals producers to scale back production.
US nitrogen producer CF Industries shut down two UK fertiliser plants — at Billingham in northeast England and Ince in northwest England — on 16 September in the face of high gas prices. The closures threatened to have major repercussions for the UK food industry, which is heavily reliant on the CO2 produced by the fertiliser industry — with CF Industries providing about 60pc of the UK's food-grade CO2 supply. The UK government was forced to provide short-term financial support to enable the Billingham facility to restart operations, although the situation at the Ince facility remains unclear.
Europe's largest fertiliser producer, Yara, has cut its ammonia production by 40pc, citing high gas prices — although some of these shutdowns include previously scheduled maintenance.
Much of Ukraine's urea production also could halt in the coming weeks. Fertiliser producers Odessa Port Plant (OPZ), Ostchem and DniproAzot — which together account for 280mn-330mn m³/month of Ukraine's gas consumption — are in the process of shutting down production at a number of their plants, either in response to high gas prices or for maintenance.
Aluminium producers are also voicing concerns about the rising cost of gas for their furnaces and other power costs, particularly as they are also being squeezed by sharp price hikes on silicon, magnesium and scrap.
Some UK aluminium suppliers say they are considering stoppages, but as yet there are no indications that they plan to go ahead with them. But they are unlikely to be operating at full capacity.
On the steel side, some UK plants are having to suspend operations because of "extortionate" energy costs, industry association UK Steel warns. "While prices have risen across Europe, wholesale prices have quadrupled in the UK and merely tripled in Germany, when accounting for carbon costs," director-general Gareth Stace says. "This exacerbated the already grossly unequal electricity price disparity between UK steelmakers and our European competitors."
Emergency relief calls
Spanish gas association Sedigas has called for emergency tax relief measures in response to the spike in gas prices, similar to a package introduced to address the impact of high power prices in mid-September.
The measures include a reduction of the special electricity tax and the suspension of a 7pc tax on electricity generation until at least the end of this year, among other measures.
Sedigas "regrets" that the Spanish government has not extended similar measures to other energy sectors to "protect all energy consumers".
The gas sector, along with other energy providers, should benefit from a similar tax cut, including on value-added tax (VAT) and Spain's tax on hydrocarbon production and use, Sedigas says.
A 21pc VAT will still apply to gas, affecting about 8mn consumers nationwide, compared with a reduced VAT of 10pc for electricity and water, the association says. Industrial consumers accounted for 57.1pc of Spain's total gas consumption in 2018-20. The ceramics industry — one of Spain's most gas-intensive sectors — has seen its energy bill rise by 61pc so far in 2021 from a year earlier, and the Spanish Ceramic Tile Manufacturers' Association has warned that the industry's survival is at risk.
