"Energy Crisis" hitting Europe hard - Sept 4

[dan_s]

"Exorbitant Rise In Energy Prices" Forces Europe's Top Steelmaker To Close Plants
BY TYLER DURDEN
SATURDAY, SEP 03, 2022 - 07:45 AM

Even though European power and natural gas prices have subsided this week, Germany, the largest economy in the bloc, still faces historically high energy costs that have forced cuts in industrial output.

The latest example is the world's largest steelmaker, ArcelorMittal, which released a statement Friday about shutting down two plants and idling one.

Europe's top steelmaker said two plants in Germany (one in Bremen and the other in Hamburg) would be partially closed at the end of September. A plant in Asturias, Spain, will also be idled.

ArcelorMittal blamed the coming smelter shutdowns on "the exorbitant rise in energy prices," which is devastatingly impacting the company's "competitiveness of steel production." The decision to reduce metal output was also based on "weak market demand and a negative economic outlook" as energy hyperinflation risks sending Europe into a deep recession.

"As an energy-intensive industry, we are extremely affected. With gas and electricity prices increasing tenfold within just a few months, we are no longer competitive in a market that is 25% supplied by imports," explained Reiner Blaschek, CEO of ArcelorMittal Germany.

Blaschek asked lawmakers to address the historic energy crisis and get prices "under control immediately." Elevated prices this summer have resulted in a series of smelter closures from other metal-producing companies because high energy costs made production uneconomical.

In Germany, one of every six industrial companies feels forced to reduce production due to high energy prices, a survey by the Association of German Chambers of Industry and Commerce, DIHK, showed at the end of July. Nearly a quarter of the companies forced to reduce production had already done so by end-July, and another one-quarter are in the process of scaling back production due to sky-high energy prices, according to the survey of 3,500 companies from all sectors and regions in Germany.

The energy-intensive industries and firms are particularly hit, as 32 percent of the companies plan to or have already started to reduce production and even halt entire production lines, the DIHK survey showed. -- OilPrice.com's Tsvetana Paraskova

Runaway energy costs were halted this week as German year-ahead electricity futures plunged by half since Monday's peak above 1,000 euros a megawatt-hour as the EU considers market interventions. EU NatGas prices closed down about 33% from the highs reached on Aug. 25.

However, here's where things get very dicey. After European markets closed, around the lunch hour in New York, news broke that Russian energy giant Gazprom won't resume critical NatGas supplies to Europe via Nord Stream 1 tomorrow after an oil leak was detected. There's no timeframe when NatGas supply will resume to the energy-stricken continent.

Europe's energy crisis could materially worsen, which means higher NatGas and power prices that will only curb more industrial output. Germany could fall into recession this winter, bringing the rest of the bloc down with it.

[aja57]

https://www.zerohedge.com/markets/swede ... sky-moment

"Last weekend, Credit Suisse repo guru published what may have been the most insightful snippet of the entire European energy crisis (to date) when he extended the infamous "Minsky Moment" framework to Europe, and specifically Germany, which he said "can’t cover its payments without Russian gas and the government is asking citizens to conserve energy to leave more for industry." He then elaborated that "Minsky moments are triggered by excessive financial leverage, and in the context of supply chains, leverage means excessive operating leverage: in Germany, $2 trillion of value added depends on $20 billion of gas from Russia… …that’s 100-times leverage – much more than Lehman’s."

Many don't realize that this is not just about heating homes. The idea that Austria and Sweden think they can compartmentalize energy from all other sectors of the economy by is neophyte mentality. As Dan's article alluded, just ask ArcelorMittal and ultimately Mercedes, BMW and the entire European financial community.

[Fraser921]

This guy thinks oil is going down

https://youtu.be/BZ_U6nSGY_w

There is certainly fear in the market

[dan_s]

The Ed Morse interview is 2 months old.
> IMO the "FEAR" of a recession's impact on oil demand is much worse than the reality that this world is "short oil" today.
> There is no quick fix for supply to catch up with demand.
> OECD countries cannot keep draining their SPRs and the OPEC cartel is definitely out of spare capacity.
> U.S. and all OECD petroleum inventories (especially space heating fuels) are much lower than they should be this time of year.
> I also think the chance of Iran bringing a significant amount of oil to market this year is declining each day.