European metals industry calls for release of gas reserves to curb prices

Europe’s metals industry will be hit by a new wave of restrictions and shutdowns unless action is taken to deal with soaring energy prices, a group representing some of the world’s biggest producers has warned. the region.

Eurometals, which counts groups such as Glencore and Rio Tinto among its members, wrote to European Commission President Ursula von der Leyen on Tuesday urging the EU to consider releasing strategic gas reserves and capping prices carbon to help sustain smelters.

“Without stronger action from the EU and member states, there is a real risk of further cuts and closures in our sector, to the detriment of Europe’s strategic goals of self-reliance,” says the letter, which also pleads for emergency state aid.

The call comes days after France, which has just taken over the rotating EU Council presidency, convened a conference on actions needed to secure Europe’s supply of critical raw materials such as industrial metals.

Financial pressure caused by record high gas and electricity prices has forced several major metal producers to cut production and mothball their mills.

Large industrial consumers such as automakers have been forced to import metal, often with a higher carbon footprint, from the United States or China.

Aluminum Dunkerque, Europe’s largest metal producer, cut production by 15% while Nyrstar, the zinc producer owned by commodities trader Trafigura, mothballed a 150,000 tonne-per-year smelter in Auby, in northern France, and halved production at three other sites.

Goldman Sachs estimated that 820,000 tonnes of primary aluminum capacity and 750,000 tonnes of primary refined zinc smelting capacity had been suspended across Europe in recent months.

He said an aluminum smelter in Europe fully exposed to market power prices in the fourth quarter of last year would have lost $1,000 on every tonne of metal produced. For zinc smelters, the equivalent loss would have been $540 per tonne.

Non-ferrous metals, including aluminum, copper, zinc and silicon, are much more energy intensive to produce than other metals such as steel, with electricity costs accounting for up to 40% of production costs. production.

Aluminum, used in everything from cars to power lines, is often referred to as solid electricity because of the large amounts of energy required to transform its key ingredient, alumina, into the refined metal.

If today’s high electricity prices become systemic, Eurometaux said Europe, which has traditionally protected its aluminum smelting sector with import duties, would not be able to produce sustainably the metals needed to produce batteries for electric vehicles or to manufacture wind turbines and solar panels. It risks undermining the bloc’s plans to tackle climate change, known as the Green Deal.

“The reality is that growing global demand for metals is currently being met by new refining capacity in other parts of the world,” the letter said.

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Traders expect energy prices on the continent to remain high as Europe seeks to fill its gas storage. This means that there will be little respite for metal producers in the near term.

As Brussels released a “toolkit” of options to deal with soaring prices, such as direct income support and tax breaks, Eurométaux said concrete action was needed to prevent a “decade repeated spikes in electricity prices”.

His suggestions include the use of strategic reserves to stabilize gas prices, capping the cost of carbon in the EU and the rapid development of an emergency state aid framework allowing member states to act. quickly, similar to that used during the pandemic.

Member countries should also reduce or cap electricity taxes and surges for heavy industrial uses, he said.

“As electricity prices have risen in many countries around the world, European producers have been hit the hardest,” the letter said. “Indeed, industries in most countries outside Europe benefit from regulated tariffs set by local governments or benefit from favorable power purchase agreements that protect them against the recent price increase.”

Mary I. Bruner