A survey by the the German Association for Plastics Packaging and Films IK Industrievereinigung Kunststoffverpackungen in Bad Homburg among its 300 member companies has revealed that one in five plastics packaging producers in Germany are on the brink of survival. Companies are struggling because of the dramatic increases in energy costs. The association is calling on politicians to take action.
While companies with fixed contract have not yet been affected, others are less fortunate. They are being confronted with electricity prices that are 300, 500 and up to 750 percent higher than at the beginning of the year. The price of natural gas has also doubled on average.
The outlook for next year is even more dramatic for the next year: in 2023, electricity price hikes of up to 1,200 percent are being predicted for some, with an average increase of around 240 percent expected.
The cost of natural gas will double, say experts, with the highest estimates indicating price increases of more than 1,000 percent in individual cases. On average, natural gas prices are currently expected to rise by 250 percent in 2023.
Martin Engelmann, general manager the IK association said that many energy-intensive companies have not yet concluded electricity contracts for 2023, nor will it be economically feasible for them to do so in light of the tenfold increase in price on the electricity exchange.
A gas levy is also planned, which will further burden companies, he noted. That measure is due to take effect in October. “So far, most of our member companies have managed to pass on at least some of the drastically increased energy costs to their customers. This is one of the reasons why most companies are not yet affected in their production and ability to deliver. But that will change in the next few months if energy prices remain at the same level or continue to rise,” he warned.
According to the survey results, half of the companies are already expecting negative effects on production in Germany in 2023. Uncertainty about the Russian gas supply and the imminent gas shortage in the next few months are the main contributing factors. The survey shows that freezing the natural gas supply freeze have a negative impact on production in 2 out of 3 companies, and significant consequences for almost a third.
While the energy cost containment programme of the federal government, under which energy-intensive companies will receive a total of €5 billion for the period February to September 2022 will help, Engelmann qualifies these grants as ‘not even a drop in the bucket’.
Moreover, they are also linked to strict requirements that many companies in the industry cannot meet.
“The requirement that electricity and gas costs must have at least doubled in the current year compared to the previous year is particularly problematic. Because for many companies, the price shock will not come until next year,” he said.
He added that ‘for too long, the federal government has turned a blind eye to the consequences of the gas price increase for the electricity market’.
“We are now facing a dramatic electricity problem and the government must act to prevent mass production shutdowns and job losses,” said Engelmann. The current coupling of the electricity price to the gas price must end. Today’s high gas prices have bumped all energy prices up, generating huge profits for providers producing energy from wind, solar or coal.