Fear in the industry due to the high price of gas: the first bankruptcies are announced in the United Kingdom

Related news

The gas prices the first victims are already being claimed in the European industrial sector: the agri-food sector. Is in United Kingdom, but analysts point out that it is only an example of what could happen if the historical records of this company are maintained over time. commodity, which has shot up 381.2% in one year, according to GasIndustrial.

According to British media, food companies warn that the high global demand for gas and the increase in prices, also in the electricity bill, are causing stoppage of fertilizer factories, essential in your production chain. So much so that British poultry giant 2 Sisters Food Group, or pork producer Cranswick, warn of going bankrupt.

Although Spain and Portugal are the countries in the Old Continent where MWh is paid the most, in the United Kingdom, stratospheric prices have been reached from time to time over the last month. For example, it peaked this week at 2,500 pounds / MWh (about 2,930 euros / MWh), due to the rising cost of gas, the lack of wind in Ireland and a fire that caused the closure of a high-voltage cable that imports energy from France.

Alert in the Spanish industry

The alert is already on in the Spanish industry. The organization UPA Castilla y León has denounced the extreme situation in which the chicken farms in the region due to the abusive rise in the price of gas, which is the main source of energy consumption in this producing sector. And they have warned that it makes profitability very complicated in a sector with margins that are already narrow.

It also throws a warning the brick and tile industry. According to his employer, Hispalyt, the structural ceramics industry is experiencing a difficult situation, as an energy-intensive sector, due to the rise in prices of electricity, natural gas and emission rights experienced throughout this year 2021.

“The increase in the energy bill of brick and tile factories puts the competitiveness of companies at risk, compromising their viability and continuity,” they say in a statement.

Electric Sustainability Fund

“It is true that in the industry there is concern and concern about gas prices,” he explains to EL ESPAÑOL / Invertia Verónica Riviera, executive president of GasIndustrial, the employer group that groups the large gas consumers in Spain.

“But not everyone is in the same situation, it will depend on the contract they have with their marketer, which is usually indexed to Brent (prices are reviewed quarterly) or to one, two and even three years.”

However, he acknowledges that “the problem could be important if these high gas price levels are maintained beyond what the futures market marks, until the spring, because then it is a one-off effort.” For the representative of the sector, what could be the last straw is the approval of the National Fund for the Sustainability of the Electricity System. “It would make producer prices more expensive and, therefore, would be a blow to the competitiveness of our industry.”

The industry continues to be the first gas consumer in our country, with 64.9%, followed by combined cycle power plants (17.7%) and the domestic-commercial sector (16.3%).

Sudden gas drop

According to the latest report on FX Insights produced by NomuraEuropean gas markets have been trapped for months between their current low levels of storage, strong demand for liquefied natural gas (LNG) from Asia and a reduction in pipeline supplies from Russia and Norway. Daily prices record historical highs and futures for this winter have risen 200% and exceed € 70 / MWh.

This has a direct consequence: the rise in inflation. But he assures that, if it is “temporary”, it could cause a very rapid increase and then also fall quite quickly. It is also something that is not really under the control of the banks centrals and will affect to the cost of production and will reduce real income.

In this the ASE Group analysts. They say that the level of European warehouses is right now at 67% of their capacity, and will continue to grow, at least, until mid-October. Therefore, unless winter is exceptionally cold, shouldn’t be troublesome. But if, on the contrary, winter was warm, would occur a sharp reduction in gas prices. They could be placed below the level of the € 25 / MWh for February and March, well below the € 70 / MWh at which it is currently listed.

Therefore, based on the weather, Grupo ASE analysts calculate that the range in which the price of gas can move this winter is very wide, ranging from € 20 and € 100 / MWh. The futures market has been in the highest range because it discounts a very high risk premium.

On the other hand, in addition to mild weather conditions, two other factors could limiting the gas rise in the short term. There could be a decline in Asian demand, which it is currently storing, and demand for gas to produce electricity could also decline. In the first case, there are voices that warn of the slowdown in Chinese production and the effects of the fall of the Evergrande real estate. And, in the second case, there is only one way: more renewable.


Leave a Comment