European smelters are facing “unpredecented” cuts to production or permanent shutdown due to the energy crisis and urgent emergency action is needed, an industry body has warned.
In an open letter to the European Commission (EC) Eurometaux, Europe’s nonferrous metals trade body, said the winter ahead could “deliver a decisive blow” to many operations. This would affect strategic electricity-intensive industries.
Half of the EU’s aluminium and zinc capacity has already been forced offline due to the energy crisis, alongside significant reductions in silicon, copper and nickel.
“In the last month, several companies have had to announce indefinite closures and many more are on the brink ahead of a life-or-death winter for many operations,” the letter said.
“Producers face electricity and gas costs over 10 times higher than last year, far exceeding the sales price for their products. We know from experience that once a plant is closed it very often becomes a permanent situation, as reopening implies significant uncertainty and cost.”
In a speech to the European parliament today, EC president Ursula von de Leyen confirmed a windfall tax on energy companies' profits, which aims to raise €140bn, that would be channelled to vulnerable households and businesses.
Eurometaux explained the clean energy transition requires a growing metals sector to ensure a secure supply of raw materials.
The letter said: “Base metals, battery metals, and other metals are all needed in higher volumes for Europe’s grid infrastructure, electric vehicles, solar panels, wind turbines, and hydrogen electrolysers, as well as a complex web of other essential value chains across the European economy.
“But all metals production needs affordable and available electricity and gas, whether aluminium and zinc today or lithium and cobalt tomorrow.
“We are deeply concerned that Europe faces a critical situation for the foreseeable future, with a perfect storm of sky-high electricity prices, no energy market liquidity due to insecure gas supplies, a continued nuclear and coal-phase out, and the remaining power sources being insufficient to cover market needs.
“Europe cannot have a successful energy and raw materials strategy if its power and gas prices stay at today’s levels for a sustained period without relief.”
Additionally, any further loss of metals production in the EU would increase greenhouse gas emissions, due to the need to import them from more polluting regions.
Eurometaux is calling on the EC to:
- Take temporary action to address the excessive price of fossil fuel power generators;
- Improve the temporary state aid framework, through raising the €50m threshold for relief member states can provide to struggling companies;
- Actively promote and incentivise the use of renewable power purchase agreements;
- Minimise the impact of extra carbon costs from the emissions trading system;
- Provide further support to companies through capping taxes and surcharges on electricity and gas, creating an emergency EU relief fund for energy intensive industries;
- Implement schemes supporting short term interruptibility and demand response flexibility and critically provide support for longer term care and maintenance curtailments.
It said the EC should avoid extra regulatory costs on suffering industries, diversify sources of gas supply and evaluate options for temporary solidarity measures to rebalance the windfall profits in other sectors.
A report from S&P Global in July found the global copper supply was projected to fall short of demand by 2035, as energy transition-related applications are expected to double demand to 50m mt. S&P said the severity of the deficit would depend on the industry’s ability expand capacity.