The energy crisis has hit Europe’s largest economy hard, forcing the closure of two of Germany’s biggest steel plants.
ArcelorMittal’s plans to close one of its largest steelworks in Hamburg last month shocked the entire industry.
The world’s second largest steelmaker has announced that it will shut down its Bremensite blast furnace at the end of October.
ArcelorMittal is the first large industrial group in Germany to stop production due to the energy crisis.
From steel, chemicals, glass and paper to ceramics manufacturing, high energy use sectors are in the spotlight.
Reiner Blaschek, CEO of ArcelorMittal Germany, warned that the steelmaker’s German division could no longer compete with high energy prices. according to to Sleigh News.
Due to rising gas and electricity prices, many German industrial companies are facing input costs that exceed their profitability.
“We had to accept that gas and electricity prices had increased tenfold in a few months. We are no longer competitive in a market that is 25% imported. Control energy prices immediately. We see an urgent need for political action to do so,” Blasek said.
Rising gas prices have already reduced demand for steel in manufacturing, the automotive and construction industries, and continue to increase the operating costs of steel mills.
“Now production in Germany is no longer competitive,” said the CEO of ArcelorMittal.
Russian energy sanctions and dependence on Germany
Massive cuts in Russian natural gas, triggered by European Union sanctions against Moscow over the Kremlin’s invasion of Ukraine and the loss of key pipelines due to sabotage, have seen Germany’s industrial sector struggle. .
European steel capacity has already been cut by about 20% across the bloc, with ArcelorMittal paying most of it, Bloomberg reported.
Germany’s additional energy costs are expected to exceed $10.6 billion in 2022, about 25% of the steel industry’s average annual turnover. according to To the German steel industry association Wirtschaftsvereinigung Stahl.
In addition to energy costs, the steel company said “low market demand, a negative economic outlook and high CO2 costs in steel production” were behind the decision to close both sites. report industry week.
Germany has been unable to import enough LNG and gas from Norway to keep electricity prices down, leaving much of the continent at the mercy of the market.
The company’s decision to partially shut down its large steelworks in Hamburg and Bremen has raised concerns that industry in Germany, the backbone of Europe’s largest economy, faces a significant threat.
The Hamburg plant will also suspend production of sponge iron, a key raw material in steelmaking, on October 1 until further notice.
ArcelorMittal’s move caused problems in the supply chain. This is because the plant produces more than one million tonnes of steel per year for machinery, automobiles, ships, pipeline production and construction.
The workers will join the 530 employees at the Hamburg plant and will continue to work part-time at the Bremen site.
The Hamburg Steelworks, which consumes enormous amounts of energy, has been coordinating production with local authorities so as not to interfere with local residents’ peak electricity usage.
The Hamburg facility consumes large amounts of natural gas, which currently comes at a premium, but without the flow from Russia, the steelworks would be weather dependent and there would be enough solar and wind power for the grid. could only work if there was
One of the crude iron smelters used 76,000 kWh of electricity per hour. That’s the equivalent of 500,000 TVs. according to to Diewelt.
According to Slay News, Ansgar Jüchter, an engineer at the plant, said, “There is a demand for gas in the city of Lübeck and a demand for electricity in Kiel.”
Scholz’s government tries to reassure the public as analysts warn of impending disaster
There are fears among economists that the escalating energy crisis plaguing Germany could spell doom for the economy if sluggish conditions in Germany’s core industrial sector persist.
Industrial production accounts for about 22% of Germany’s GDP. according to to AFP.
The German government is already bracing for a recession after forecasting earlier this month that GDP will contract by 0.4% in 2023.
“Competitive energy prices are needed for industry,” Blaschek said, calling for immediate political intervention as energy costs are spiraling out of control.
“Other industrial sectors are also in big trouble,” Blaschek warned, adding that a downturn in Germany’s steel industry could lead to a domino effect that could collapse the rest of the country’s industrial sector.
Association of German Chambers of Commerce (DIHK) Said Frankfurter Allegmeine Zeitung says the German economy could collapse and come to a halt if businesses cannot access more energy supplies.
DIHK president Peter Adrian said: “More and more companies are saying they have no contract to supply electricity or gas at all.
Economy Minister Robert Habeck has told German industry that the government will do its best to support them during the energy crisis. report Redaktions netzwerk Deutschland.
“There is a threat of shutdown and we have to deal with it.
German Chancellor Olaf Scholz has announced a $198 billion energy relief fund for struggling homes and businesses, setting a temporary cap on gas prices next year, according to AFP.
Last week, Chancellor Scholz ordered ministers to keep the country’s three remaining nuclear power plants operational until mid-April after an energy crisis split his tripartite coalition. report Associated Press.
But Scholz will continue to push for legislation to end the use of coal in Germany by 2030 and build new power plants that burn hydrogen instead.
The Associated Press contributed to this report.
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Bryan S. Jung is a New York City resident with a background in politics and the legal industry. He graduated from Binghamton University.