Gas price shock set to add to Europe’s industrial pain

STORY: Europe’s struggling industries are bracing for a new gas price shock over the coming winter months.

Colder weather is depleting stocks, and competition with Asia for liquefied natural gas has intensified.

The prospect of reduced Russian supplies is also looming.

Since the energy crisis of 2022, when gas prices peaked at nearly 350 euros per megawatt hour, dozens of firms across Europe have closed factories and cut activity.

Many are maintaining reduced demand and lower manufacturing activity, with negative implications for Europe’s sluggish growth.

European Union gas demand is 17% below the five-year average observed during pre-pandemic years.

At the same time, gas prices are at their highest level in over a year and analysts predict they will rise further.

Nervousness about the expiry at the end of the year of a Russian transit deal to supply gas to Europe via Ukraine has helped to drive buying.

Data from Gas Infrastructure Europe shows EU-wide gas inventories are 85% full, some 10 percentage points lower than a year ago.

Analysts say that makes the current winter already feel uncomfortable.

To try to safeguard supplies, the European Commission last week increased its storage filling target.

That could potentially add to the upward pressure on prices.

Current EU prices are nearly five times higher than U.S. gas.

A survey by Germany’s chambers of commerce in August found that high energy prices and a lack of reliable energy supplies were hindering industrial production.

It’s also prompting some German firms to consider relocating abroad.

In France, industries expect to operate at 70-80% of capacity this winter due to high energy prices.

That’s according to the president of a French industrial lobby group.