A new report published by the International Energy Agency (IEA) warns about the massive pressure being put on the European energy-intensive industry for several reasons such as higher power prices and support for legislative packages implemented in  the US, China or Japan.

Sectors such as chemicals, aluminum, and steel have reduced their production in the second half of 2022, which was expected amid the energy crisis. However, despite significantly lower prices in the first half of 2023, “energy-intensive industries have not yet recovered from last year’s production slump, as evidenced by the staggering 6% year-on-year decline in total EU electricity demand” says IEA.

 Furthermore, for some companies in the aluminum sector, temporary activity reductions announced last year turned out to be permanent closures. Slovenian Talum said in May the complete shutdown of its aluminum production citing high energy prices and late state aid. Also, Slovalco, the only aluminium producer in Slovakia decided to permanently halt its activity due to the “inaction of the government” as stated by the company.

 Meanwhile, industry groups are diverting previously planned investment away from our continent. Volkswagen AG, Europe’s largest car maker, announced this year that it put on hold its investments in Europe building instead its largest battery-cell factory in Canada. “The move is part of a strategic pivot to capture a bigger share of U.S. electric-vehicle markets, driven by attractive subsidies, Europe’s ponderous bureaucracy and uncertain economic prospects”, according to Wall Street Journal.

The agency’s report also points out that “small and medium-sized businesses in industries such as paper and automation have gone insolvent as high energy prices mean they are no longer profitable.” Data from Eurostat showed that the number of bankruptcy declarations increased by 26,8% in the fourth quarter of 2022 compared to the previous quarter to “reached the highest levels since the start of the data collection.” The upward trend continued in the first quarter of 2023 when the bankruptcy level rose by another 2,8%.

 “In the face of rising energy costs, the European Union stands at a critical juncture to decide its course of action regarding energy-intensive industries” concludes IEA. According to the agency, despite the several steps which have already been taken by the EU, the bloc needs “to create a more supportive environment to the industry that is facing competition from abroad.”