MOSCOW, October 9 – Novosti, Irina Krasikova. In the EU, factories are closing one by one – due to high energy prices, production turned out to be unprofitable. Others are rushing to move capacity to the US and China. Without Russian gas, Europe risks losing industry altogether, analysts warn. Plus, a long recession threatens.
With hope for Americans and Chinese
Industrial migration from Europe began a few years ago – because of the “green” course of the EU.
Factories forced to pollute the atmosphere less, introduced the maximum amount of greenhouse gas emissions. Basically, they were beaten with the ruble, that is, the euro: those who did not comply with the requirements paid heavy fines.
© AP Photo / Michael Probst
BASF chemical plant in Ludwigshafen, Germany
Then they started talking about the carbon tax. “Environmental protection has led to an increase in the fiscal burden in metallurgy, fertilizer production, and the chemical industry. Companies have revised their strategies. They have increased their capacities in the United States or China,” recalls Fedor Sidorov, founder of the School of Practical Investment.
The current energy crisis caused by rising gas prices has exacerbated the situation. Enterprises have become unprofitable.
We have to significantly increase the prices of products in order to recoup the costs. However, in the context of global competition, this is very risky. Demand is falling – buyers find alternatives from suppliers from other countries.
Therefore, European factories are hastily transferring capacity to the United States. This affected mechanical engineering, the chemical industry. “About 60 companies from different sectors of the economy are reducing production in Europe and expanding overseas. Oil, gas and coal have also risen in price there, but less than in the EU,” Sidorov says.
In particular, this was done by the German automaker Volkswagen.
© AP Photo / Erik Schelzig
Car assembly at the Volkswagen plant in the USA
In parallel, the Germans are actively investing in China. The indicator of the first half of the year is a record ten billion euros. There are plans to open factories BASF and BMW.
However, there are concerns about Beijing’s ambivalent policy. On the one hand, the Chinese are trying to avoid American restrictions in connection with the Ukrainian crisis, on the other hand, they demonstrate loyalty to Russia. The fragility of such a position increases the risk of secondary sanctions, which, in the worst case scenario, will also affect European production in China. Not surprisingly, the US market looks more attractive.
“All this plays into the hands of the United States, which has long considered the EU as a competitor,” said Andrey Morozov, president of the Eurasian Business Alliance.
Meanwhile, there are enterprises that had to stop altogether – the costs are too high. Slovalco, the main supplier of aluminum in Europe, has been idle since September, having reduced the production of primary light metal by 40 percent. The Dutch zinc plant Budel and the Romanian chemical giant Chimcomplex are on pause.
Polish fertilizer producer ANWIL also suffered. In Germany, closes branches of SKW Sticksoffwerke Piesteritz.
Complete deindustrialization
The situation was aggravated by gas leaks at Nord Stream. The emergency in the Baltic Sea further confuses the already difficult situation with Russian gas supplies to Europe.
Nord Stream has been suspended since late August due to problems with Siemens turbines. But the fuel remained in the pipe. In the Nord Stream 2 that did not work, too.
Repair is technically possible, Deputy Prime Minister Alexander Novak said. However, it will take a lot of money and time. According to experts – a few months, and maybe even years.
The countries of the European Union are on the verge of deindustrialization, writes the Chinese Global Times. “Rising costs will cause a shortage of industrial raw materials in Europe, including metals,” the article says.
Realize the impending collapse and Western politicians. “Europe risks a huge reduction in industrial activity and social unrest if it does not take quick action to reduce energy prices as winter approaches. Without intervention in the gas markets, massive de-industrialization is possible and the long-term consequences of this will be very serious,” said Belgian Prime Minister Alexandre De Croo.
Overseas forecasts are also disappointing. The EU is now much worse off than the US, says American economist Jeffrey Sachs. Unlike the Europeans, the Americans do not depend on Russian gas and are able to supply the domestic market.
Meanwhile, weather forecasters promise Europe a cold winter, but with less rainfall and without strong winds. And this means weak electricity generation from wind and hydropower.
By February or March, gas storage facilities will run out, according to Fatih Birol, head of the International Energy Agency. Prices will skyrocket not only for electricity, but also for groceries. In the EU, annual inflation has been breaking historical records for several months in a row: in some countries – more than 20%. And this is not the limit.
