Power cost surge jeopardises ‘Made in Germany’

The extreme increase in energy prices seen in recent months means that many medium-sized steel and metal processing firms will no longer be able to cover their costs, warns their federation, WSM.

The exchange electricity price for procurement in 2022 has risen since October 2020 from around €40/MWh ($46.50) to over €128/MWh (base load), if taking the prices of the EEX stock exchange at day-end. Prices of €400 reported earlier were possibly only peak bids at certain hours during the day. Gas prices in the same period have risen from less than €30/MWh to around €130/MWh, with previous daily peaks of €160/MWh. 

WSM – Wirtschaftverband Stahl- und Metallverarveitung – represents mostly small and medium-sized companies, and emphasises that this segment is suffering, in particular, from rough economic spells.

On average, the industry achieves a profit margin of 1.5% (2019), Kallanish hears from WSM. Even with the average energy cost share of 2.1%, “it is clear even to school kids that the companies will run into considerable losses from 2022 onwards”, the federation states. “Experience shows that it is extremely difficult to pass on the costs to customers.”

Within the German economy, the segment of small and medium enterprises, with many so-called “hidden champions”, has a special reputation as the backbone of industry. Hence, the cost surge will affect family businesses, which have often been the largest employer in their regions for years. “In contrast to listed groups, SMEs still maintain close relationships with their employees; they take on social and societal responsibilities,” WSM notes.

Christian Koehl Germany