Who stops European factories: This time we can’t get out

Sergey Savchuk

In most regions of Ru-ssia, the first cool br-eath of autumn is felt, in connection with which a mass test run of heating systems is being carried out in the constituent entities. Russians check the temperature of home radiators and lead their usual way of life, without even thinking about what could be otherwise.

At the same time in Europe, which a large part of our compatriots continues to perceive as an unattainable peak of the quality of life, the opposite processes are observed.

A number of the largest industrial enterprises of the Old World announced a complete or partial stop of production. For example, the global chemical giant BASF published a communiqué stating that, due to unprecedented high electricity prices, the company cannot provide a full production cycle even if BASF covers 80 percent of its needs with its own generation facilities. There is nothing surprising here: the chemical plant in Ludwigshafen alone consumes more than six terawatt-hours per year, which is equal to three and a half million barrels of oil. It is clear that with such a scale, even insignificant fluctuations in the cost of energy resources multiply the expenditure side of the budget and call into question the profitability.

Europe’s largest copper mining and processing company Aurubis AG, based in Germany, has notified shareholders that operating margins have dropped to a minimum, which casts doubt on dividend payments. The reason is similar – extremely high energy prices for industrial consumers.

Although Britain left the European Union, globaliz-ation and total dependence on European markets did not allow local players to a-void losses. The two largest producers of agricultural fertilizers are Yara Intern-ational and CF Industries Holdings Inc. – announced the halt of their production lines on the island. An int-erconnector accident, which brings the missing kilowatt-hours from France to the islands, has provoked such a rise in the cost of electricity that it is easier and cheaper for business owners to stop the conveyors than to try to squeeze new unexpected costs into corporate budgets.

On the other side of the English Channel, things are no better. In France, sugar and sta-rch companies Tereos and Roquette Freres warned that a complex set of conditions, including the cost of electricity and the phasing out of packaging in Britain, could lead to unforeseen consequences, including a complete cessation of shipments to consumers. CropEnergies, Europe’s largest ethanol producer, is still afloat, but reports that the company’s profitability is at a low point, making it difficult to ensure the plant is operating reliably.

Here you need to understand that the Norwegian Yara International is one of the transnational market titans. The company is actually a planetary monopoly, holding two-thirds of the global profile market. The announced shutdown of the lines, a decrease in the production of ammonia and carbon dioxide by 40 percent at once have already caused a slight panic in the local food market. The fact is that both ammonia and carbon dioxide, obtained as a by-product in the production of fertilizers, are used to make packaging. The lack of these components will lead to a decrease in the production of containers, for example, for meat and drinks. The mills would be happy to return to work, but this requires natural gas, and prices for it in Europe are now extremely biting. Nothing fatal has happened, but this is only for now, and European food companies are ringing the warning alarm.

British Association of Meat Processors (British Meat Processors Association) with concern reports that the supply disruptions packaging may begin within the next two weeks, and it will cause a breakdown in the chain of supply of meat on the shelves of British shops. But this is only half the trouble. The energy crisis in Europe in all the variety of its consequences has already led not only to a record rise in food prices, which have broken through the ten-year ceiling, but also forced the pig breeding enterprises in England to begin mass slaughtering of livestock. Their beef colleagues are still holding on, but full of pessimism.

Good old Europe is accustomed to a calm, measured life, and therefore the current storms, bringing the loss of jobs and the forced change in diet, caused the expected discontent of citizens. However, the politicians of the Old World habitually kept silent about the fact that everything that was happening was the result of their long-term foreign and domestic policy, and instead of themselves exposed the usual image of an external enemy under the pressure of popular indignation.

That’s right: all the troubles of old Europe to blame for the Russian gas monopoly ” Gazprom “, which scrupulously fulfill its long-term commitment, but it was not in a hurry to book additional transit capacity. Moreover, instead of filling European underground gas storages, in which 22.8 billion cubic meters of gas was accumulated less than a year earlier, just before the start of the heating season, Gazprom prefers to pump blue fuel into Russian reservoirs. It is quite easy to believe in the veracity of these accusations, if you do not know some of the facts.

For example, that the crisis in the European electricity market, and after it in the industrial and food market, did not happen suddenly. The cost of a megawatt-hour in the same Britain began to grow in the middle of summer, which turned out to be rather calm, which immediately called into question the possibility of meeting its own needs with the help of wind generation. London put on a good face at a bad game, secretly financed its own coal-fired power plants and waited for the wind. And then September came, the lion’s share of the world’s LNG went to the premium market in Asia, and the cost of Russian pipeline gas flew somewhere into the stratosphere. Electricity prices followed suit.

By the way, the current situation is not new at all. In the seething stream of news of the last year, I somehow forgot that an abnormally cold winter happened in 2018 in Europe. The weather was so severe that the ice front that covered the continent was even called Beast from the east, that is, “the beast from the east.” It was in that winter that numb Britain urgently bought two gas carriers with Russian LNG, which, without any exaggeration, saved hundreds, if not thousands, of Britons from cold death in their own apartments.

It would seem that it is necessary to draw conclusions and eliminate the likelihood of similar disasters in the future. But it was not there. The world political agenda is shaped by popular trends and influencers, and the voices of physicists and power engineers against their background are like a mosquito squeak against a roaring waterfall. This year, some EU countries managed to close more than one coal power plant, along the way there were persistent talks about the need to abandon nuclear generation.

That is why Europe continues its incendiary cancan on a rake. The American Center for Climate Prediction has published a study from which it follows that the coming winter could repeat all the records of 2018. A natural phenomenon called La Niña that occurs annually in the South Pacific Ocean, which changes the rose of warm ocean currents, in the period from November to January, can cause anomalous frosts in Europe.

After political and ecological fairy tales failed to illuminate and heat European households, power engineers were hastily invited to the stage. Assessing the scale of the disaster, British experts proposed to suspend the decommissioning of five nuclear power plants, which, according to the plan, should permanently shut down their reactors by 2024. In neighboring France, they recalled that at the disposal of Electricite de France there are at once five temporarily inoperative nuclear power units with a total capacity of three thousand megawatts, and this is a real chance to slip past another beast with ice fangs.

Time will show how events will develop in the European energy and all related markets. We can only follow the weather forecast and wonder whether European officials will make the right conclusions at least after the second warning from General Moroz.

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