The steel and chemical industries are not the only ones to suffer from expensive natural gas and electricity. Even everyday objects often have to be produced using a lot of energy. The energy crisis is thus threatening the existence of companies.
Hakle is insolvent. The Düsseldorf manufacturer of toilet paper will only see its 100th birthday in 2028 if the planned renovation works on its own. Hakle gives the sharp increase in production and logistics costs as the reason for the insolvency announced on Monday. Electricity, natural gas, fuel for transport and even the wood fibers for paper production have risen in price more than they could have been passed on to customers.
Hakle is far from the only company in Germany suffering from high energy costs. Although the price for a megawatt hour of natural gas at the Dutch trading point TTF has recently fallen below EUR 200, it is still 219 percent above the level of a year ago and 1700 percent higher than two years ago. A megawatt hour of electricity currently costs about four times as much as it did a year ago.
The entire manufacturing German economy is affected by this. After all, every company has to transport its resources and preliminary products and later its goods. Every machine in every factory is powered by electricity, and natural gas is often the medium of choice where things have to get hot. The energy crisis is also affecting many sectors that manufacture products for our everyday lives and where a connection to high gas or electricity prices is not immediately obvious. For example:
Food is already one of the products whose prices have risen the most compared to the previous year. In the case of sunflower oil (82 percent), this is due to the fact that it mostly comes from Ukraine, but butter (48 percent), flour and cereal products (34 percent), poultry (34 percent) and milk (32 percent) are also among the best.
The connection is simple: Farmers need good fertilizer for high yields from their fields, and high-quality fodder for livestock. Fertilizer, in turn, is made from natural gas, animal feed from the plant residues from the production of cooking oil. The European fertilizer association Fertilizers Europe recently reported that European manufacturers had already reduced fertilizer production by 70 percent this year for cost reasons.
In the short term, this causes prices to rise sharply at the supermarket checkout. In the long term, it could jeopardize the security of supply. The farmers’ association has been demanding help from the state for months, and the Federal Ministry of Agriculture is still hesitating. Food production in Germany is secured until next summer, according to Berlin.
Minister Cem Özdemir (Greens) advocates that German farmers should become less dependent on mineral fertilizers made from natural gas and thus on Russia. An alternative would be manure made from animal excrement and/or plant residues. For environmental reasons, scientists have been calling for a change for years. Germany has already been reprimanded several times by the EU because the nitrate content of our soil exceeds limit values due to the excessive use of artificial fertilizers.
“No gas, no beer” – with this short and concise sentence, Veltins boss Michael Huber summed up the situation in his industry in June. Brewhouses in the breweries are mainly operated with gas. But that’s not the only problem in the beverage industry: In Thuringia and Bavaria, three breweries recently had to stop production because of a lack of carbon dioxide. Without the carbon dioxide, not only does the production of beer stop, but also that of lemonade, mineral water and other beverages containing gas. The reason: Carbon dioxide is usually a by-product of fertilizer production. And it stops as shown above. Other beverage manufacturers have sounded the alarm and there is a risk of further production stops in the coming weeks.
Many products in your bathroom would be unthinkable without natural gas. The raw material is not only in Hakle’s toilet paper, but also in cleaning agents, detergents, toothpaste and cosmetics – if not directly in the product, then definitely in the respective plastic packaging. Natural gas is also used for packaging and films in many other companies that produce consumer goods. The German Chemical Industry Association (VCI) estimates the annual consumption for this alone at around 30 terawatt hours. In addition, there is a multiple of the energy required to manufacture the chemical products.
The high dependency on natural gas is thus getting many sectors into trouble. Chemical companies have already slightly reduced their production. If gas prices continue to rise or if more deliveries fail, more drastic measures are possible. “If we are missing certain primary products as a result of missing gas deliveries, in the worst case we would have to shut down parts of production,” says Henkel CEO Carsten Knobel to Focus magazine.
Hakle is now the first prominent case of bankruptcy in the industry. More could follow. Small manufacturers in particular are likely to have problems passing on price increases to consumers or absorbing the loss of chemical precursors.
The pharmaceutical industry needs natural gas in two ways. On the one hand, it is used directly for some manufacturing processes, for example where certain active ingredients have to be extracted at high temperatures or where steam is required. However, this only affects a few fields of application in industry. The drug manufacturers are hit harder indirectly by the energy crisis, because important precursors need natural gas. This includes, for example, glass, which is produced using a great deal of energy. Without ampoules, pharmaceutical production would be at a loss. Aluminum is also required for many processes, which can only be produced in a gas-intensive manner.
In addition to rising energy prices, the global supply crisis is also a cause for concern, because according to the pharmaceutical association VFA, 60 percent of all medicines sold in Europe are now manufactured in China. But because pharmaceutical factories in China also have to shut down more often because of Corona, there are more and more delivery problems in Germany too. Painkillers, antibiotics and fever syrups in particular are currently rare.
The pharmaceutical industry does not have to fear bankruptcies because of this. In the event of a gas shortage, it should be supplied with priority. This also ensures that the population is supplied with at least all essential medicines. In the medium term, the EU would like to strengthen the domestic market again. At the end of 2020, in response to the corona pandemic, it developed a new drug strategy that aims to produce more drugs in the Union again. It is to be adopted by the EU Commission by the end of the year and then implemented in the member states.
At first glance, the furniture industry is doing well. In the first half of the year, their sales increased by 13.4 percent compared to the previous year. But the industry doesn’t feel like celebrating. “We are not naive: the industry is facing a difficult second half of the year, in which we will experience significant declines,” says Jan Kurth, head of the industry association VDM, to the world.
The increase in sales in the first half of the year was not due to higher sales figures, but solely to higher prices. Since June, however, demand has collapsed. With the rise in prices for everyday products, Germans are reducing the consumption of non-essential goods such as furniture. Demand for upholstered furniture fell by 38 percent and for bedroom and dining room furniture by 35 percent. For kitchens, the decline was even more gentle, at 7 percent. Around half of all furniture sold in Germany also comes from German production.
This will not become a problem for the domestic furniture industry by the end of the year. The order books are well filled, so that production is running at full capacity even without new orders. What is produced becomes expensive. According to the VDM, wood and wood-based materials currently cost 46 percent more than a year ago, steel 50 percent and packaging 42 percent. Suppliers have already announced the next price increases.
Bankruptcies will be unavoidable. At the end of June it hit the upholstered furniture manufacturer Pora from Upper Franconia, whose order intake had already halved since April. The cautiously pessimistic mood in the industry is also reflected in the number of employees. With 78,712 people, it stagnated at the level of the previous year.
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