Consequences of the energy price explosion
A recent survey by the IK Industrievereinigung Kunststoffverpackungen e.V. among its 300 member companies shows that the high energy costs have reached a level that threatens the existence of every fifth company in the industry. The association calls on politicians to act in order to prevent production shutdowns and job losses.
The mostly medium-sized manufacturers of plastic packaging and films in Germany, like many other energy-intensive industries, are shocked by the dramatic increase in electricity and gas prices. Although some companies have been able to avoid a cost increase so far due to current contracts, on average in the industry electricity costs have doubled since the beginning of the year. Many companies, however, have to pay 300, 500 and up to 750 percent higher electricity prices than at the beginning of the year. The current situation is similar for natural gas, where prices are up to 625 percent higher than at the beginning of the year and have doubled on average.
For next year, the situation looks even more dramatic: in 2023, increases of up to 1,200 percent are expected for electricity in individual cases, with an average increase of around 240 percent. For natural gas, too, most companies expect at least a doubling; here, too, the highest estimates assume an increase of more than 1,000 percent in individual cases. On average, natural gas prices are currently expected to rise by 250 per cent in 2023.
"Many energy-intensive companies do not yet have an electricity contract for 2023. In view of a tenfold increase in prices on the electricity exchange, it is not economically feasible to conclude such a contract at present; the companies inevitably run into the overheated spot market," explains Dr Martin Engelmann, Chief Executive Officer of the IK. In addition to the high costs, there is also the planned gas levy, which further burdens companies. "So far, most of our member companies have managed to pass on the drastic rise in energy costs to customers, at least in part. This is one of the reasons why most companies are not yet affected in their production and ability to deliver. However, this will change in the coming months if energy prices remain at this level or rise further," warns Engelmann. For 2023, half of the companies already expect negative effects on production in Germany. The reduction in Russian gas supplies and a looming gas shortage in the coming months will also affect the plastics packaging industry: as the survey shows, a natural gas supply stop would have a negative impact on production for 2 out of 3 companies, and for just under a third it would even have significant consequences.
Major hurdles on the way to government subsidies
The German government's energy cost containment programme, which aims to provide energy-intensive companies with subsidies totalling 5 billion euros for the period February to September 2022, can be used by just under one in five companies in the sector, while it is out of the question for 40 per cent.
"In view of exploding energy prices, these subsidies are not even a drop in the ocean," Engelmann criticises, pointing out that the subsidies are also tied to strict conditions that many companies in the industry cannot meet. "The condition that electricity and gas costs must have at least doubled in the current year compared to the previous year is particularly problematic. Because for many companies, the price shock will not come until next year," Engelmann said.
Call on politicians to limit cost increases
The IK calls on politicians to take measures in the short term to stop the rise in energy prices.
"For too long, the federal government has turned a blind eye to the consequences of the gas price increase for the electricity market. Now we have a dramatic electricity problem and the government must act to prevent mass production shutdowns and job losses," demands Engelmann. In the association's view, what is needed above all is an internationally competitive industrial electricity price and an industrial natural gas price. The linking of the electricity price to the gas price must be ended. "In the short term, the price of natural gas used in power plants to generate electricity must also be capped for a limited period of time. It is not acceptable that industry should finance the windfall profits of electricity producers," Engelmann said.
The planned gas levy must be capped for industrial customers. In addition, the additional charges due to national fuel emissions trading must be suspended because they no longer make sense in view of current gas prices and are therefore unacceptable.
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