German aluminum smelter considers halving production due to energy costs

Foreign media on Aug. 23; German aluminum producer Speira is considering cutting production at its German smelter to 50% of total capacity in response to soaring energy costs. The high cost of electricity is causing power-intensive industries across Europe to take a hit.

Spera used to be the aluminum business of Norsk Hydro in Norway. It was sold to KPS Capital Partners last year. Spera’s aluminum smelter in Neuss can produce about 160,000 tons of aluminum, although it currently produces only about 140,000 tons.

Spera’s director, Moritz K. Hansen said the company will make a decision on additional production cuts in September.

This year’s energy crisis has taken a heavy toll on the European metals industry, which is one of the largest industrial consumers of electricity and natural gas. Capacity for aluminum and zinc in the region has fallen by about 50 percent in the past year. Industry groups have warned of further capacity closures during the winter.

Last week, zinc producer Nyrstar and Norsk Hydro announced plans to close a zinc smelter and an aluminum smelter, respectively.

Hansen said Spera is considering a 50% cut in production, but that has not been decided. He said energy prices on the European market have now far exceeded the price of aluminum futures on the London Metal Exchange.

Aluminum is one of the most energy-intensive metals to produce, and long-term power supply agreements and energy hedging have only covered a fraction of the spike in electricity prices over the past year. Some smelters are now moving to shut down production altogether, a move that could have a long-term impact on regional supply and make European consumers more dependent on imports.

Aluminum futures in London hit an all-time high of more than $4,000 per ton in March this year, then fell amid concerns about slumping demand. Weak aluminum prices are adding to the smelters’ woes. If these smelters were to operate at exactly the current energy prices in countries like Germany and France, they would suffer severe losses. Spera is also a consumer of natural gas and therefore faces a significant increase in costs due to the gas security tax imposed in Germany.