Posted on 10 Aug 2022
European authorities must provide targeted financial support to ferro-alloy producers that are struggling to survive the continent's acute energy crisis, industry association Euroalliages general secretary Ines Vanlierde told Argus.
Members of Euroalliages held meetings with director generals of the European Commission late last month to request electricity price caps and subsidies for electricity costs, and to convey the severity of the metallurgical industry's position, Vanlierde said.
"We are terribly impacted by the level of energy prices — if they keep climbing, we won't be able to compete," she said.
"This is probably the worst crisis we ever went through, because what I hear from Euroalliages members is that when they knock on their national authority's door… they sympathise and understand, but basically they are not doing a lot, or nothing at all for the time being," she said. "We are extremely frustrated."
The absence of a long-term unified response is not sustainable, Vanlierde said. "The problem is that policy between the member states is not harmonised," she said. Adding that "the lack of consistency creates an imbalance within the single market".
Some European countries have enforced energy caps to tackle soaring energy prices, although Vanlierde questioned the effectiveness of these existing measures, such as those in place in Spain.
Speaking last month, Spanish Euroalliages member Ferroglobe's chief operating officer Benjamin Crespy commented that "if we look at the manganese-based alloy business we currently have a significant amount of volume temporarily idled given the unprecedented level of energy cost in Spain."
"If the system were effective, we wouldn't face that situation," Vanlierde said.
In Spain and Portugal there is currently a 12-month cap on gas prices, agreed by the commission, ensuring that they remain lower than an average of €50/MWh. In Italy, there is 20pc tax credit in place for energy-intensive companies facing a 30pc rise in prices. France has put a cap on the state-owned energy provider for a year. Slovenia will also put a cap on prices from 1 September.
Support is understandably being prioritised for households, public healthcare
and renewable energy investment, but this leaves ferro-alloy producers in a dangerous position, Vanlierde noted.
Some Euroalliages members have already idled operations, "so we are running through a process where at this level of electricity price we cannot produce, and of course we cannot compete", she added.
"We have heard from high-level European officials, that the situation will not fundamentally improve until the end of next year, or early 2024, a statement which raises serious concerns regarding the future of electro-intensive industries in Europe and the implementation of green European ambitions as imports from high-carbon sources keep growing," she said.
Competing Asian ferro-alloy suppliers such as Malaysia and China do not face the same electricity prices and have more fossil fuels in their power generation mix than many European countries. Lower-cost supply is therefore being fed into the European market at a considerable discount to alloys produced on the continent — a trend that has been further fuelled by the build-up of inventories at Chinese ports earlier this year during Covid-19 restrictions.
For example, China's ferro-silicon exports totalled 398,577t in January-June, up by 78.4pc year on year, according to customs data. This influx put considerable pressure on European prices in May, which fell to €2,700-3,100/t ddp at the end of the month, down from €3,950-4,250/t ddp at the start.
"The steel and aluminium industry are very hit [by soaring energy costs] as well. Many plants are also shutting down," Vanlierde noted. "We are hit twice because we are in a difficult situation but our customers that are more downstream in the supply chain are hurt as well — there is a domino effect."
Since October 2021, Europe has had to close or halt 50pc of its primary aluminium production, a key downstream sector for the silicon industry, owing to the skyrocketing energy prices, according to industry group European Aluminium.
Steelmakers around Europe have also cut production in response to the energy crisis, and market participants are cautiously waiting to see if September will bring an uptick in demand and lend any support to hot rolled coil prices, which have fallen by 45pc since late March to €772.25/t ex-works northwest Europe.
Source:Argus Media
