September 29, 2022

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Factories are closing due to energy prices and we will notice that |  Currently

Factories are closing due to energy prices and we will notice that | Currently

Due to rising energy prices, many large energy consumers in the Netherlands have recently reduced or stopped production altogether. And more companies will follow, according to various experts NU.nl spoke with. Consumers may notice.

Damco Aluminum in Delfzeel has been completed Thursday Immediately stop aluminum production. It takes a lot of energy to produce the metal and energy prices have skyrocketed in the last year.

The company’s management saw temporary closure as the only option “due to sky-high energy prices and lack of government support”. In October last year, the company actually stopped producing liquid aluminum, which cost 120 employees of the company more than 300 jobs.

Zinc producer Nirstar has also halted production since 1 September. That company did not literally mention high energy prices as a reason to close the plant, but a source close to the company told the news agency in August. Reuters The company’s electricity costs have increased tenfold.

Economists at Rabobank expect Earlier this month, many of the industry’s top consumers were forced to reduce or halt production in the coming months due to rising energy prices. Companies operating in the chemical industry, paper industry, metallurgy industry and food industries are expected to be affected.

More difficult to pass higher costs

For a long time, many companies in the energy-intensive industry have been able to pass on their increased costs to their customers, says Liz Nauta, an economist at Rabobank. The bank expects this to become less successful for businesses in the future.

This is because buyers in turn are no longer willing or able to pay the higher price at a given moment, for example because their profit margins then disappear or become much smaller. “At a certain point it stops. They think the price they have to pay is too high.”

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This can be explained by an example about cycling. For example, if the price of aluminum goes up, at some point bicycle manufacturers won’t be able to pass on those higher costs to consumers, says Nauta. “They also have a limit on what they want and they can pay for a new bike. Then they leave the new bike where it is and go buy a used bike, for example.”

Prices may go up for consumers

Nauta says it’s hard to predict how big the impact on consumers will be if companies in the industry reduce or stop production. This is partly because companies do not always produce for the Dutch market, so stopping does not automatically affect prices in the Netherlands.

“But in general, you can expect prices to go up, because that’s when there is little and the demand for it remains the same,” says Nauta. Albert Jan Swart, industry economist at ABN AMRO, agrees. “The materials will become much more expensive and we will notice.”

It’s also hard to predict how much trouble we’ll get into. “There is an alternative to a new bike, for example a used bike,” says Nauta. “But that’s not the case for everything. We’ll keep buying bread, for example.”

Energy is still expensive

The company wrote in a press release Thursday that Damco Aluminum will resume production “when conditions improve.”

Nowa says it’s unlikely that energy prices will fall again soon. “We expect energy prices to remain high for a long time to come. So it is expected that some companies will also look at other ways of production, for example using green electricity instead of gas if possible.”

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Swart says the price of electricity is also much higher than it was a year ago. For this reason, this is not expected to be a short-term solution. Moreover, it is by no means possible for all firms in the industry to simply start production in a different way. “For now, the companies are stuck.”