On August 22, foreign media reported that European electricity prices have skyrocketed in the past few months, with high electricity prices forcing aluminum smelters to close. The European energy crisis has triggered increasing volatility in trading as traders assess the relationship between massive supply losses and the rising risk of runaway inflation and tighter monetary policy hitting demand.
The second round of effects of Europe’s sky-high electricity prices are being felt. Base load electricity prices in France and Germany will reach levels in a year’s time that mean only a few Europeans will be able to afford their power bills for a year.
Europe’s energy crisis has caused another victim in the power-hungry metals industry, after Norsk Hydro said it plans to close an aluminum refinery in Slovakia at the end of next month.
Since aluminum is one of the most energy-intensive metals to produce, there are growing signs that Europe’s industrial economy is under pressure as electricity prices soar to record highs, and the closure of the Slovaco plant has exacerbated that pressure. That’s why Hydro and other companies are now moving to shut down nuclear plants altogether. Zinc and aluminum smelting capacity in the region has been cut by about half in the past year, largely because producers have reduced output.
Hydro, Slovalco’s majority shareholder, said the closure was in response to unfavorable conditions, including “high electricity prices with no sign of improvement in the short term. The Norwegian company said the smelter, which has an annual capacity of 175,000 tons, is operating at 60 percent of that capacity and will suffer significant losses if it continues to operate beyond 2022. On Tuesday, Hydro said production at another Norwegian aluminum plant would be affected by a strike that began on Aug. 22, adding to supply pressure.
Europe’s energy crisis has led to increasingly volatile trading on the London Metal Exchange (LME), where traders are assessing the relationship between a series of supply losses and the rising risk that runaway inflation and tighter monetary policy will hit demand for industrial metals in some of the world’s major economies.
Industries from fertilizer to aluminum have been hit hard by soaring energy costs, and Russia’s invasion of Ukraine has squeezed gas supplies to Europe. Russian gas supplies will only slow further after reports last week that Nord Stream 1 (Nord Stream 1) will be shut down from Aug. 31 to (at least) Sept. 2. Benchmark power prices soared to record highs this week, and the worst energy crisis in decades looks set to continue into next year.
With electricity prices soaring and politicians pushing measures to reduce energy use during the winter months, the metals industry is on the cusp of huge electricity demand. The production of each ton of aluminum requires about 14 megawatt hours of electricity, enough to power an average British household for more than three years.
Comprehensive above news can be seen, high electricity prices lead to European aluminum smelters to reduce production, resulting in a decline in aluminum production, which will support aluminum prices, the future may appear to rise, investors need to keep an eye on this.
Post time: Aug-23-2022