European manufacturing sector crumbling due to high electricity and natural gas prices

Manufacturers in Europe can’t keep up with the rising costs of electricity and natural gas. Energy prices are skyrocketing now, and are projected to remain high for the next few years. Under these circumstances, energy-intensive industries will lose money or go belly up entirely.

Javier Blas of Bloomberg writes:

For example, an aluminum smelter would lose about $200 million annually at current forward prices for electricity and carbon dioxide for the next year. And that’s despite elevated prices for the metal in the markets. Aluminum may be an extreme example, but it’s evidence of the pressures faced by industrialists.

In private, European executives say they’ll use the forthcoming quarterly reporting season in mid-July to announce more plant closures. The affected industries will be those with the most intensive energy use: fertilizer, base metals and steel, chemical, ceramic, glass and paper. But increasingly food production will be, too. Heated greenhouses and chicken farms face astronomical energy bills.

A few companies have already announced their intentions. Earlier this month, CF Industries Holdings Inc., the US fertilizer producer, said it will close one of its UK plants permanently as it struggles with high energy costs. Others are on the chopping block. The future of Slovalco, an aluminum smelter in Slovakia in which Norsk Hydro ASA has a majority stake, looks very grim, with the plant likely shutting down in 2023.

Energy is defined as the ability to do work. Without using energy, no work gets done. This truism makes energy the invisible ingredient in everything. If energy becomes less available or more costly, it becomes more difficult and expensive to manufacture goods or provide services.

Unfortunately, many policymakers in Minnesota want to enact policies that will make our electricity less reliable and greatly increase costs. This will hurt energy-intensive industries, like manufacturing and mining, the most.

We need a strong Minnesota that has low-cost reliable energy. We can’t afford to enact the same policies as Europe and hope for different results.