BAKU, Azerbaijan, Dec.9. Extremely high energy usage in the smelting process, as well as falling prices for metals such as aluminium and zinc, is eroding profitability in the metals sector, Trend reports Dec.9 with reference to the Economist Intelligence Unit (EIU).
“Average monthly wholesale electricity prices in key countries reached about €375/MWh in September, a tenfold annual increase. For aluminium, the most energy-intensive metal to smelt (at 14 MWh/tonne of primary production), this implies a power input costing US$5,200/tonne, more than double the spot price of aluminium (less than US$2,300/tonne). Other metals such as steel, although less energy intensive, are seeing similarly unviable cost dynamics,” reads the latest EIU report.
The report reveals that operating smelters under such conditions is not sustainable, even for short periods of time, and over half of productive capacity in Europe is now idle.
“Even plants with long-term power contracts will be at risk as these come up for renewal. The longer wholesale prices remain above €100/MWh—they were at about €200/MWh in early November— the more challenging it will be to renew at affordable rates. Even firms with access to power under preferential tariffs have had to cut production. Some smelters have maintained some production by avoiding peak usage times; but many cells can only remain without power for a few hours without risking a costly metal freeze. Given these extreme operating conditions, the risk of further smelter closures remains high.”
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