The Spanish industry is experiencing a critical moment. The rise in the price of raw materials, supply problems and now the transporters’ strike make their situation more complicated every day. Especially if it is electro-intensive or gas-intensive factories, immersed since last summer in an unprecedented rise in energy prices that makes their production unviable. Even more so since the war between Russia and Ukraine broke out, which took the cost of a megawatt hour to the historic figure of 545 euros on the 7th. Waiting for the decisions made by the Spanish Government next week to limit the price increase of energy, after Brussels admitted this Friday the “Iberian exception” in the European Council to be able to temporarily separate gas from the electricity pricing system, as claimed by the industry, the moment could not be more complex .
“The final price of electricity rose 320% last year and so far in 2022 it has almost doubled. It is becoming unsustainable to continue producing”, admits ArcelorMittal. Its factories in Olaberria, Sestao and Gijón have suffered intermittent stoppages since the conflict triggered energy to its highest peak; they produce below their usual limits and the lack of raw materials caused by the stoppage of transport has aggravated the problem. In Sestao, the steel multinational has an active ERTE, and “in the rest of the facilities it will be necessary to negotiate plant by plant,” he predicts.
This steel company is no exception. Acerinox, G. Celsa, Megasa, Ferroglobe and Siderúrgica Balboa have also temporarily stopped some of their facilities. And others such as Asturiana de Zinc have reduced their manufacturing to a minimum, according to the Association of Companies with Large Energy Consumption (AEGE). Fernando Soto, its president, assures that after the invasion of Ukraine the situation has exploded, creating an unprecedented industrial emergency that can lead companies to massive ERTE and relocation of factories to other countries where the price of electricity is cheaper, such as Some metallurgical companies are already weighing. Soto explains that, if the average price of a megawatt was 45 euros in 2020, last year it rose to 120 euros and this one is already 230 euros. “Companies are paying an extra cost of 3 billion euros over their competitors in France or Germany, where measures have already been taken,” he says.
This rise in prices means that the price of energy has come to account for between 50% and 60% of the transformation costs of the steel industry, when in the last five years the percentage was between 20% and 30%. , points out a director of the sector, who indicates that many tons have been produced at a loss in order to comply with the committed contracts. And he adds that when the megawatt is quoted above 300 euros on a sustained basis, it is not profitable to manufacture in electric furnaces, hence the stoppages or the limitation of production to the hours when energy is cheaper.
The suspension of activity, which in the case of Celsa was used to carry out maintenance work, according to the company, has now ceased. “We will continue to produce as long as the price of steel absorbs the rise in energy prices,” indicates the company, which will continue to apply the same strategy if electricity returns to previous levels. But neither she nor the rest of the factories in the sector work at full capacity. It is estimated that they will produce 20% less during March and April to offset part of the energy price increase, in addition to having increased the final prices of their product. “But most of the electricity increase goes against the income statement,” says the aforementioned manager.
In the case of gas, prices have gone from 16 euros per megawatt hour in March 2021 to the current 160 euros, explains Alberto Echavarría, general secretary of the Spanish Association of Manufacturers of Ceramic Tiles and Pavements (Ascer), “levels that prevent production because, if a year ago gas accounted for 11% of the cost, today that percentage exceeds 37%. We are losing money since a 730% increase like last year cannot be transferred to the final product because the market does not absorb it and will buy from American or Asian competitors, ”he says. Above 60 euros per megawatt it is no longer profitable, “we need measures to be taken as they have already done in France, Italy or Portugal”, he says.
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Measures
The sector has raised its sales prices by 30%, has cut its margins, limited and temporarily paralyzed its production (as Pamesa and Porcelanosa have announced for Easter) and has at least 20 ERTEs in progress, 20% of the employees of the industry, according to Echavarría, who also complains that the transport strike is leaving them without raw materials and, therefore, endangering the continuity of the activity.
At Grespania, energy accounts for more than 30% of its sales prices compared to 10% a year ago, according to its CEO, Luis Hernández, who complains above all about the volatility in the market, in which in one day the price of gas can vary by 25%. “We cannot depend so much on its evolution, which is a consequence of Europe’s erroneous energy policy, based on the short term,” he says. The ceramic group compensates for this increase with the third price increase since October 2021, up to 30%, and temporarily cutting its production by 35%. In addition, he considers that applying ERTE “will be inevitable.” The problem, according to Hernández, is that Spain will lose competitiveness against other countries and will give up markets.
The same is believed by the chemical industry, which exports almost 60%: “These prices make Spain very uncompetitive, especially compared to the United States and China,” says Juan Antonio Labat, general director of the Business Federation of the Spanish Chemical Industry (Feique), who believes that the high demand in the sector will fall, infected by the crisis in Ukraine, possibly before energy prices do. “The situation is critical, we can run out of industry in Spain and in Europe”, supports Cosentino.
future alternatives
Although at Cosentino, the company from Almeria that develops Silestone, the electricity bill has gone from 800,000 to 5.5 million euros per month in the last year, “and despite our character as an electro-intensive industry, we do not plan to stop any production line due to the moment, nor reduce hours or shifts, ”says the company. But, yes, Cosentino is accelerating the development of “what will be the largest photovoltaic self-consumption plant in Spain, with a maximum power of 20 MW. A solar farm with almost 37,000 plates of 540 Wp each”. His intention is that by the middle of this year it will be operational, so that it can obtain 20% of its electricity consumption with its own supply, he calculates. In addition, it is going to install 26,700 solar panels on the roof of its factory by the end of 2022, with which it would reach 30% of consumption, and it is studying the possibility of installing windmills, as well as using alternative sources to the Algerian gas that comes from the Medgaz pipeline. The company will invest 24 million euros in its new energy model.
The Bellota hand tool manufacturer, which is not electro-intensive although it has seen how its budgeted electricity bill has gone from 2.7 million euros to 6.4 million between 2021 and 2022, is also considering alternatives to reduce that impact on its accounts, according to Pablo Izeta, general director of Bellota Tools for Europe, Asia and Africa. Their gas ovens are being replaced by induction ones and they plan to install solar panels that can cut at least 10% of the energy cost.
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