NYT: ‘Crippling’ energy bills force Europe’s factories to go dark
‘Crippling’ energy bills force Europe’s factories to go dark
The New York Times, 19 September 2022
Manufacturers are furloughing workers and shutting down lines because they can’t pay the gas and electric charges.
The furnace, heated to 1,500 degrees Celsius, was glowing red. Workers at the Arc International glass factory loaded it with sand that slowly pooled into a molten mass. Nearby on the factory floor, machines transformed the shapeless liquid with a blast of hot air into thousands of delicate wine glasses, destined for sale to restaurants and homes worldwide.
Nicholas Hodler, the chief executive, surveyed the assembly line, shimmering blue with natural gas flames. For years, Arc had been powered by cheap energy that helped turn the company into the world’s largest producer of glass tableware — and a vital employer in this working-class region of northern France.
But the impact of Russia’s abrupt cutoff of gas to Europe has doused the business with new risks. Energy prices have climbed so fast that Mr. Hodler has had to rewrite business forecasts six times in two months. Recently, he put a third of Arc’s 4,500 employees on partial furlough to save money. Four of the factory’s nine furnaces will be idled; the others will be switched from natural gas to diesel, a cheaper but more polluting fuel.
“It’s the most dramatic situation we have ever encountered,” Mr. Hodler said, shouting to be heard over the din of clinking glasses. “For energy-intensive businesses like ours, it’s crippling.”
Arc is not alone. High energy prices are lashing European industry, forcing factories to cut production quickly and put tens of thousands of employees on furlough. The cutbacks, though expected to be temporary, are raising the risks of a painful recession in Europe. Industrial production in the euro area fell 2.3 percent in July from a year earlier, the biggest drop in more than two years.
Makers of metal, paper, fertilizer and other products that depend on gas and electricity to transform raw materials into products from car doors to cardboard boxes have announced belt-tightening. Half of Europe’s aluminum and zinc production has been taken offline, according to Eurometaux, Europe’s metals trade association.
Among them is Arcelor Mittal, Europe’s largest steel maker, which is idling blast furnaces in Germany. Alcoa, a global aluminum products producer, is cutting a third of production at its smelter in Norway. In the Netherlands, Nyrstar, the world’s biggest zinc producer, is pausing output until further notice.
Even toilet paper is not immune: In Germany, Hakle, one of the largest manufacturers, announced that it had tumbled into insolvency because of a “historic energy crisis.”