Xinhua News Agency, Frankfurt, October 4th. Roundup: Manufacturing flows to US fuel Europe’s ‘deindustrialisation’ concerns
Xinhua News Agency reporter He Lili Wang Xiangjiang
Affected by soaring energy prices and unsmooth supply chains, some European manufacturing companies have recently been forced to suspend production or decide to relocate their production lines. Since the US energy price is much lower than that of Europe, the US has become one of the important destinations for European companies to relocate their production lines. The relocation of production lines has heightened fears of “deindustrialisation” in Europe.
The United States has become an important investment destination for European companies
According to a recent report by the German Handelsblatt, the US state of Oklahoma alone has attracted more than 60 German companies to invest and expand their business, including Lufthansa, Siemens, Aldi and Fresenius. These four companies have recently accumulated Expanded investment of nearly $300 million. U.S. states are actively promoting that “the U.S. has always been an important investment destination for German companies” to win over foreign companies to move in or expand investment.
The German auto industry is also actively expanding investment in the United States. Volkswagen Group, which launched a battery lab at its Tennessee plant in June, will invest a total of $7.1 billion in North America by 2027. Mercedes-Benz opened a new battery plant in Alabama in March. BMW announced a new round of electric vehicle investments in South Carolina in October.
In addition, German pharmaceutical giant Bayer invested $100 million in a new biotech center in Boston. The German specialty chemical company Evonik Industries has recently opened a new innovation center in Pennsylvania, and Evonik also hopes to invest more than $200 million to build a production base in Indiana. Between 2022 and 2026, German chemical giant BASF plans to invest about 15% of its global investment of 26 billion euros in North America.
Six German companies have announced to establish or expand operations in Virginia this year, up from two in 2021, according to the Virginia Economic Development Authority.
Observers point out that the United States has two major attractions for European business investment. One is that energy prices are much lower than in Europe, which helps companies reduce production costs; the other is that huge subsidy policies encourage companies to move in. For example, in the more than $430 billion invested in the Inflation Reduction Act, most of the funds were used to deal with Climate change and clean energy, which have sparked a “green gold rush” for German companies.
The Fed’s series of aggressive interest rate hikes also accelerated investment flows from Europe to the United States. John Bryson, a professor at the University of Birmingham in the United Kingdom, said that the Federal Reserve’s aggressive interest rate hikes to curb inflation have caused investment to flow from Europe to the United States. As the interest rate gap between the United States and the European Union and the United Kingdom has widened, the scale of investment flowing to the United States has further expanded.
European industry may be permanently eroded
High energy costs are forcing energy-intensive companies in many European countries to cut or suspend production, making Europe face the challenge of “de-industrialization”. Some insiders believe that if the problem is not solved for a long time, the European industrial structure may be permanently changed.
Due to high energy prices, the largest aluminum manufacturer in the Netherlands, Delf Zair Damco Aluminium, has announced a suspension of production. Norway’s Yara International, Europe’s largest fertilizer producer, has closed a large fertilizer plant in Slujskil, the Netherlands.
Rabobank believes that more energy-intensive companies may be forced to reduce or suspend production in the future, including chemical industry, paper industry and metal manufacturing companies, which will further affect related industries such as rubber and plastic products.
Half of Europe’s zinc and aluminium production has come to a standstill, and European metals smelters face an existential threat, the European Nonferrous Metals Association said. The association called on the EU and member states to take immediate action “to protect strategic energy-intensive industries and prevent permanent unemployment”.
Nicolas de Vallan, president of the French Energy Consumption Industry Alliance, said that the member companies of the alliance consume 70% of French industrial electricity and natural gas consumption, and rising energy costs make it impossible for members to provide competitive prices. product, “we’ve reached the limit”.
For European industry as a whole, De Valan warned, some sectors could survive by importing cheaper primary products from the US, while basic industries such as metals, chemicals, glass, ceramics and paper would be “eroded”.
Some in the industry predict that Germany’s economy, Europe’s largest, could be permanently altered by a rapid decline in industrial competitiveness. “If energy prices remain high for a long time, some industries will leave Germany,” said Oliver Falk, head of the Centre for Industrial Economics at the German Institute for Economic Research.
(He Lili and Wang Xiangjiang)
[Editor in charge: Yan Yujie]