Arcelor-Mittal, the world’s largest steel producer, is shutting down two production plants at the end of September due to high energy prices in Germany. “Until further notice” one of the two blast furnaces at the flat steel site in Bremen will be shut down. And the direct reduction plant in the Hamburg long steel mill is also to be shut down. In addition to the already high costs for gas and electricity, the gas levy planned from October will further burden the competitiveness of energy-intensive companies, the reasoning is said. “With a tenfold increase in gas and electricity prices, which we had to accept within a few months, we are no longer competitive in a market that is 25 percent supplied by imports,” said Germany boss Reiner Blaschek in a statement from Arcelor-Mittal quoted.
In order to avoid gas consumption in Hamburg, the preliminary product sponge iron is now being bought in from America in order to be able to continue producing – cheaper, but with higher CO2-Footprint. There is also short-time work at the production sites in Duisburg and Eisenhüttenstadt due to the tense situation.
Adaptation to high energy prices
ArcelorMittal appears to be the first major case of a drastic cut in production due to high energy prices. In the few cases in which short-time work benefits are applied for, it is only in individual cases due to the energy crisis and partly to the interrupted supply chains, the Hamburg employment agency has observed.
Arcelor-Mittal is trying to pass part of the cost increases on to customers. From November, the Luxembourg-based steel group will be charging 850 euros per tonne of hot-rolled coil steel, 13 percent more than before, the financial news agency Bloomberg reported this week, citing informed circles who made the connection with the high energy costs.
The German steel companies are comparatively cautious. Neither Thyssenkrupp nor Salzgitter nor Saarstahl or Dillinger Hütte currently have any plans to limit production. “We are in the black despite the high energy prices,” said a spokesman for Salzgitter. He pointed out that with your own power plant you are self-sufficient. In addition, the rolling process was changed somewhat because of the gas crisis. The process has been slowed down, which enables lower temperatures and a correspondingly lower use of energy, but requires more personnel. Nevertheless, the situation is being closely monitored, and a crisis management team dealing with it several times a week.
Copper is also becoming more expensive
There could also be production restrictions in the copper industry due to the high gas prices. Hamburg-based Aurubis AG, for example, produces copper products that are traded on the stock exchange, such as cathodes with a copper content of at least 99.9 percent. With such products, Aurubis is in direct international competition. The high metal prices in connection with a high demand for copper products (including for wind turbines, solar panels and electric cars) bring the company high profits at the same time. “We are financially strong and have staying power,” a company spokeswoman told the FAZ. Aurubis also benefits from the fact that only two out of six plants are in Germany and that energy prices in other countries have not risen so sharply.
In the long term, the Aurubis spokeswoman also warns, with such high energy prices it will be very difficult to produce the copper in Europe that is needed in this country for the energy transition. “If copper production has to be scaled back due to the current burdens, the expansion of renewable energies will also be slowed down,” warns the German Copper Institute. “In the second quarter, the German copper semis industry recorded a production drop of 6 percent. And that although more copper would actually be needed for the expansion of renewable energies – a trend that threatens to continue in the coming months,” is the assessment of Michael Sander, Managing Director of the Copper Association.
Nevertheless, this is not a purely German problem. In a new evaluation, the European metal association Eurometaux complains that the EU has lost around half of its aluminum capacity since October 2021, which corresponds to around 1 million tons. “The recent increase in electricity prices has forced all zinc smelters in the EU and more than half of the aluminum smelters to reduce or even stop their production,” the association says. All nine zinc smelters are affected by the energy crisis. In Germany, the large raw materials group Glencore operates a plant in Nordenham in Lower Saxony. At the same time, metal production would be built up outside the EU, which has a higher CO2emissions, complains the European lobby association.
With a European industrial electricity price, competitiveness could be improved, Aurubis expects, thereby agreeing with a demand from Arcelor-Mittal Germany. “We see an urgent need for political action to get energy prices under control immediately,” demands Blaschek. A first step must be to adjust the design of the electricity market so that the price of natural gas is not the only decisive factor in determining electricity prices.