Europe’s energy crisis is taking its toll on businesses and homes

The relentless surge in European energy prices is exposing the region’s biggest gas and power consumers to heavy losses, forcing industrial giants to cut production and threatening the economic recovery.

With energy costs spiking to fresh records day after day, financial strain is mounting for industries including metals and fertilisers. Aluminium Dunkerque Industries France, Europe’s top smelter of the metal, curbed output in the past two weeks. Trafigura’s Nyrstar will pause zinc production in France in early January and Romanian fertiliser maker Azomures temporarily halted activity.

This year’s energy crunch is so severe that gas prices surged more than 800 per cent, while power costs jumped some 500 per cent. And with the coldest months of the winter still ahead and Russia curbing gas supplies, there’s no relief in sight. All of that is threatening to leave lasting scars on Europe’s industrial economy just as the coronavirus Omicron variant spreads across the continent.

“Higher gas prices, both for households and for businesses, are going to be headwinds to activity,” Sarah Hewin, head of Europe and Americas research at Standard Chartered, said in an interview on Bloomberg TV. “This latest surge in gas prices is clearly a negative development for the outlook for all European economies and including the UK as well.”

Aluminium is one of the most-energy intensive industrial metals to make and surging power prices forced Aluminium Dunkerque to cut output by about three per cent, said union representative Laurent Geeraert. The plant lost about 20 million euros (US$22.6 million) since the beginning of November, and further curbs may be necessary if power prices remain at sky-high levels, he said.