(Original title: Russian-Ukrainian war led to soaring energy prices, European industry is gloomy)
Financial Associated Press (Shanghai, edited by Niu Zhanlin),European industrial companies have been looking forward to spring, when energy costs will come down. But with the start of the Russian-Ukrainian war this week, that hope has been dashed, and these companies are now gloomy and complaining.
Smelters and chemical plants across Europe were already struggling before the war, but the conflict has sent gas and electricity prices soaring again. Now, a growing number of companies, including BASF, Europe’s largest chemical maker, are warning that the energy crisis will continue to hit their profits for the foreseeable future.
“Energy prices will remain high and will not return to normal anytime soon,” said BASF Chief Executive Martin Brudermüller. “It could get worse if the US and Europe expand sanctions on Russia, EU 40 More than % of the natural gas comes from Russia. In a short period of time, it is difficult to replace Russian natural gas.”
France’s Dunkirk Aluminium, Europe’s largest aluminium smelter, had planned to increase output, but a union official said the plan had been put on hold due to another surge in oil prices.
German aluminum giant Trimet said it was not cost-effective to produce the metal at current energy prices. Building materials giant HeidelbergCement warned on Thursday that rising energy costs could hit profits in the coming months.
Energy prices soared in Europe last fall, sending many small European companies into bankruptcy and prompting others to temporarily cut output at unprofitable factories. Large industrial companies on the continent typically buy energy on a monthly basis, a strategy that often allows them to absorb price shocks and then gradually pass them on to consumers.
While the mild weather has brought natural gas prices down from a record high set on Dec. 21 last year, the current price is still close to four times the average over the past five years.
(Daily chart of European benchmark natural gas futures prices)
On Saturday, local time, the United States, the European Union, the United Kingdom and Canada issued a joint statement announcing a ban on major Russian banks from using the Society for Worldwide Interbank Financial Telecommunication (SWIFT) international settlement system. This further complicates the situation and could also push up energy prices sharply again.
A spokesman for SWIFT, the Society for Worldwide Interbank Financial Telecommunication, said that the market is concerned that sanctions will affect Russia’s oil and gas supply and settlement to Europe, which is also the main reason why Germany did not support the use of this “financial nuclear weapon”. Specifically, the EU-US joint statement did not say which Russian banks would be cut off from SWIFT, in particular Gazprom, which is responsible for international payments and settlements for Russian energy imports and exports, or which would not be covered by the sanctions.
Fitch believes other messaging systems, such as telex, could be used by the banking sector after being cut off, although not as efficient and costly. Russia’s self-developed SPFS payment system is expected to expand its use.
Wolfgang Hahn, boss of energy consultancy Energy Consulting GmbH, noted that there is growing concern about energy supplies later in the year, whether alternatives to Russian gas can be found, or whether gas imports from Russia will be cut off entirely.
Germany’s decision to halt the approval process for Nord Stream 2, as well as uncertainty over Russian gas supplies via Ukraine, is expected to continue to push up gas prices in the coming months.
Goldman Sachs analysts said continued rising energy prices will force some industrial producers to shrink or close.
Businesses are also turning to the government for help. France has moved to ease gas costs for consumers, with Prime Minister Castel freezing gas tariffs in November, which will last until the end of the year. The government promised to compensate energy suppliers with loans until prices fell. The French government also distributed 4.4 billion euros over the New Year to help residents cope with rising gas and oil prices. Italy also cut gas excise taxes.
Germany has not yet intervened. More than half of the country’s natural gas is imported from Russia, and the price of industrial electricity is also the highest after the EU.
A spokesman for the German Chemical Industry Association said Germany’s energy-intensive companies were very concerned about developments between Russia and Ukraine and reiterated their call for gas and electricity taxes to be reduced to the lowest possible level.