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LONDON: Europe needs its industrial companies to save energy amid soaring costs and shrinking supplies, and they are delivering – demand for natural gas and electricity both fell in the past quarter.
It is far too early to rejoice, though. The drop is not just because industrial companies are turning down thermostats, they are also shutting down plants that may never reopen.
And while lower energy use helps Europe weather the crisis sparked by Russia’s war in Ukraine and Moscow’s supply cuts, executives, economists and industry groups warn its industrial base may end up severely weakened if high energy costs persist.
Energy-intensive industries, such as aluminium, fertilisers, and chemicals are at risk of companies permanently shifting production to locations where cheap energy abounds, such as the United States.
Even as an unusually warm October and projections of a mild winter helped drive prices lower, natural gas in the United States still costs about a fifth what companies pay in Europe.
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Euro-zone manufacturing activity this month hit its weakest level since May 2020, signaling Europe was heading for a recession.
The International Energy Agency estimates European industrial gas demand fell by 25% in the third quarter from a year earlier. Analysts say widespread shutdowns had to be behind the drop because efficiency gains alone would not produce such savings.
“We are doing all we can to prevent a reduction in industrial activity,” an European Commission spokesperson said in an email.
But a survey released on Wednesday showed companies in Europe’s industrial powerhouse Germany were already scaling back because of energy costs.
