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Soaring gas prices to adversely affect EU chemical industry

Soaring gas prices to adversely affect EU chemical industry

Experts warn that rising gas prices in the European Union are likely to put pressure on the chemical industry, the blue hydrogen production as well as steel companies in the region.

On September 15, the natural gas spot price on the EU futures market has exceeded 20%, reaching $950 per 1,0000 cubic meters for the first time in history. Since the end of April 2021, natural gas prices have been growing non-stop. Notably, in early September, prices soared by 1.5 times.

What is more, high gas prices also hurt the market attractiveness of companies from several industries, e.g. the production of nitrogen fertilizers and gas chemicals. Previously, these industries were unable to compete in terms of costs with ones in the United States, Russia, and Middle Eastern countries, where gas is cheaper than in the EU.

"The present steep climb in gas prices affects European energy-intensive industries immediately and necessarily," Mate Toth, the Head of the Energy Projects Department at FinExpertiza, said. Therefore, it may lead to a rise in the cost of heating and electricity production, especially at gas-fired power plants.

"Wherever there is a high demand for heating and energy, almost every company will be indirectly affected in the business scene. The commercial sectors in Europe are the ones most likely to be hit by the extremely high gas prices, where even a short-term price increase affects production and service costs through cooling, heating, drying, lighting, and so on," Mate Toth pointed out. "The chemical industry, for example, nitrogen plants in Europe, is also exposed to risks, as well as hydrogen production, e.g. in Germany, where not "green" hydrogen but blue is dominant, generated from gas," the expert added.

EU chemical and steel companies are also likely to face low demand due to rising gas prices. Taking into account the current prices for coal and the disposal of harmful waste, the actual gas price should total $500 per 1,000 cubic meters and below. However, in the spot market, the gas price is much higher than the actual one. It slows down the replacement of harmful coal plants with neutral gas-fired power ones. As a result, eco-friendlier plants are unable to withhold the competition.

 


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