Gas price surge: European chemical industry face headwinds in production
The fluctuating natural gas supply and its price have been threatening businesses across Europe, especially those energy-intensive ones. The chemical industry, relies on natural gas from Russia, is particularly affected.
The German chemical industry association (VCI) stated that the exorbitant gas and electricity prices are causing massive problems in many parts of the chemical industry and are forcing the industry to cut production. The first production facilities are already at a standstill, and value chains are beginning to break down.
"The current crisis does not leave us any time for experiments, because it poses an acute threat to industry and thus to the basis for peace and prosperity throughout Europe. German and European politicians must now do everything they can to prevent the worst from happening,” remarked Christian Kullmann, VCI President.
According to Reuters, BASF, the world’s leading chemical manufacturer and one of the largest natural gas users in Germany, is closely monitoring the natural gas market.
BASF could cut production further if needed after Russia suspended deliveries through its main gas pipeline to Germany. BASF added that it was bracing for high and volatile gas prices.
Another leading polymer supplier, Covestro, also reported a 33.0% drop in EBITDA in the second quarter of 2022. The company said that this was mainly caused by significantly higher raw material and energy prices.
Huntsman Corporation, a publicly traded global manufacturer and marketer of differentiated and specialty chemicals, is sharing the similar situation.
Peter Huntsman, Chairman, President and CEO at Huntsman Corporation, commented, "Huntsman is feeling the same pressures as others in the industry as we are being impacted by persistent and extraordinary cost of energy in Europe, together with lower than expected demand across segments in our portfolio, primarily within Polyurethanes and Performance Products"
Regarding the energy crisis, VCI is proposing on how it can be mitigated. The energy supply, for example, has to be expanded rapidly in order to stabilize the gas and electricity markets in the very short term. Gas-fired power plants must be temporarily squeezed out of the electricity market.
The energy cost containment program is needed to be extended and designed to be SME-friendly as well. Companies in chemical parks should also benefit from this.
In addition, the current imbalance on the energy markets must be tackled at European level, brought up VCI. It is important to succeed in constructing a European electricity price brake and securing it under state aid law, so as to stabilize energy markets in Europe.
Edit : HANDLER