Germany’s basic material industries ring alarm, demand power price cap

Leading players in the basic material industries are calling for a price gap on electricity prevent plant closures and even companies from shutting down operations completely as well as ensuring Germany’s future as an industrial location. The CEO of German building materials group HeidelbergCement, Dominik von Achten, called for introducing a Europe-wide price cap, warning that if prices don’t fall permanently, the company may have to close plants, Frankfurter Allgemeine Zeitung reported. Wolfgang Grosse Entrup, head of the German Chemical Industry Association (VCI), echoed the call, warning that Germany’s industry could come to a standstill if chemical production is no longer possible due to high energy prices, adding that also natural gas prices should be capped. HeidelbergCement, which is planning to change its name to Heidelberg Materials, has already prepared for possible closures, CEO von Achten said, adding that the group had bought most of the electricity it needed over the long term, but still had to acquire the rest on the spot market at short notice. If energy prices didn't go down, cement production sites in Germany would face difficulties. HeidelbergCement is the second largest cement manufacturer in the world and the second largest producer of concrete and aggregates, such as sand and gravel. The group operates nearly 150 cement plants globally, including eight cement plants and three grinding facilities in Germany. The company expects energy costs to increase by 1 billion to 3.1 billion euros in the current year. An electricity price cap – ideally throughout Europe -- could stabilize the market, von Achten added.

Speculation is likely driving electricity prices, partly because the federal government is buying gas at almost any price, he said. The problem could only be solved permanently with a price cap, possibly set between 150 to 200 euros per megawatt hour. Greatly fluctuating prices, from more than 1,000 euros to less than 100 euros per megawatt hour, make planning impossible, said the company’s CFO René Aldach. HeidelbergCement, which aims to increase green cement production, in 2020 announced plans to reduce CO2 emissions per tonne by 30 percent by 2025 compared to 1990 levels, five years earlier than previously planned. The VCI’s Grosse-Entrup, meanwhile, warned: "If chemical companies have to cut back or even stop their production because of astronomical energy costs, it is a disaster for Germany as an industrial location."

Energy prices have skyrocketed across Europe over the past year, with the Russian war on Ukraine greatly exacerbating upward price trends that started during the economic coronavirus pandemic recovery in many countries in 2021. Germany's dependence on Russia as a gas supplier has made the country particularly vulnerable to the energy market fallout of the war in Ukraine, leading to expectations of a recession in 2023 and possibly lasting damage to the country's industrial basis that so far has relied on cheap pipeline gas. However, industry group BDI recently announced many companies' decarbonisation targets remained in place despite the energy crisis.