Gas price hike may hit German economy with production cuts - media reports

Media reports show that rising prices for energy and especially for natural gas across Europe could start to hamper German companies’ ability to operate. Salzgitter, the country’s second largest steel producer, said it could not rule out production stops at some plants, business newspaper WirtschaftsWoche reported. Producers Swiss Steel Group, which runs several plants in Germany, said it would need an “immediate relief” from the government to keep up its production levels, news magazine Spiegel reported.  “We look at the rising energy costs with great sorrow,” Jürgen Kerkhoff, head of industry association WV Stahl, said. The high costs for energy would “seriously impede” the steel industry’s transformation to climate neutral production, Kerkhoff warned, arguing that price developments warrant a reduction of taxes and levies on companies. Together with producers of chemicals, aluminium and cement, steel companies are among the biggest energy users in the economy. Construction material producer HeidelbergCement said the “unprecedented cost explosion” would force it to increase its own prices in the short term. Energy company E.ON stopped offering new gas supply contracts to households, as drastically higher market prices had forced the company to overhaul its contract structure, manager magazin reported. In September, E.ON stepped in to cover the gas supply of customers of Deutsche Energiepool, the first gas provider in the country to go bankrupt due to the gas price hike. E.ON said it would continue to supply these customers regardless of its decision to stop offering new contracts.   

Prices for gas and electricity have reached new record levels in Europe in recent months due to a wide range of reasons. Economic recovery in many countries around the world after the coronavirus pandemic’s effects have subsided has let demand spike, while renewable power output has been low and gas storages lower than usual after the past cold winter season. Higher prices in the European emissions trading system ETS have also contributed to higher overall costs for energy.