The metals industry within Europe is set to face another wave of closures unless the EU makes significant steps to address the continually rising cost of energy, Eurometaux, a non-ferrous metals association, has warned.
The financial impact of rising energy prices has led many large metal producers to curtail their output significantly. So far, more than half of the EU’s aluminium and zinc smelters have reduced capacity or have closed temporarily, with silicon production also cut as a result of record power prices and squeezed supplies.
This, in turn has resulted in larger industrial consumers, including car and electronic companies, turning to China and the US to fill the gap. Eurometaux wrote to Ursula von der Leyen, European Commission president, on Tuesday to press the EU to consider releasing strategic gas reserves and capping carbon prices to support smelters.
“Without stronger EU and member state action, there is a real risk of further curtailments and closures in our sector, to the detriment of Europe’s strategic autonomy goals,” said the letter, which also makes the case for emergency state aid.
Goldman Sachs estimated that 820,000 tonnes of primary aluminium capacity and 750,000 of primary refined zinc smelting capacity had been suspended across Europe in recent months. Aluminium Dunkerque, Europe’s largest producer of the metal, has cut production by 15% and Nyrstar, the zinc producer, has halved its output across three of its sites.
“The EU has temporarily lost 650,000 tonnes of primary aluminium capacity; about 30% of the total,” Eurometaux said in a letter to European Commission President Ursula von der Leyen. “Europe’s supply gap must be bridged with imports, often with a higher (CO2) footprint.”
The EU, in response, has published a “toolbox” of options to deal with the price surge, such as direct income support and tax breaks. However, Eurometaux stated that the EU must take more robust action to prevent a “decade of repeating power price spikes”.
The group advised the use of strategic reserves to stabilise gas prices, capping the cost of carbon in the EU, and developing an emergency state aid framework that permits member states to take quick and robust action.