Steel price talks stand back for energy talks

Germany’s steel processors and fabricators are the segment of the value chain that is being worst squeezed by the massive surge in energy prices in Western Europe, a recent industry event heard.

Depending on their activity, they rely on extra consumption of gas and electricity, in addition to the premium energy costs that are already incurred upstream by the steel mills. If mills hand down their extra costs, their customers are bitten twice by the energy price craze.

“The forwarding of the energy costs is currently the hardest part of negotiations – much harder than the bargaining for the actual steel price,” Christian Vietmeyer, managing director of German fabricators federation WSM, said at last month’s MBI Stahl Tag in Frankfurt.

“Many of our member companies do not get any offers at all, not even regular customers of the utilities, and not even at sky-high prices,” he said at the event attended by Kallanish. Utilities have some obligation to supply private households, but not to companies. WSM is currently lobbying for a change in the political regulation to this effect, Vietmeyer observed.

On the day of the conference, the gas price saw a temporary peak at €186 ($182) per MWh, while long-term supply contracts are expected to settle at €75-80, according to Heinz Jürgen Büchner of IKB Bank.

“This is a four-fold increase compared with existing contracts, and you can be happy if you get away with that,” he stated. Such prices, from domestic utilities, equal the price of imported liquefied natural gas from US fracking, and will render prices for German parts and components uncompetitive internationally, he noted.

Roland Döhrn, formerly of RWI Essen Institute, concurred. He highlighted that “Germany is a strong industrial location for its big steel users and their export business.” He asked: “Will they move their production elsewhere to remain competitive?”

Christian Koehl Germany