High Energy Prices Force One In Six German Firms To Cut Production

One of every six German 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 on Monday. 

Nearly a quarter of the companies forced to reduce production have already done so, 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. 

With gas supply from Russia reduced and prices of non-Russian gas and electricity soaring in Germany and Europe, German companies are struggling. 

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. 

The survey also showed that only half of Germany's industrial companies have covered their annual 2022 gas requirements via contracts. More than a third of industrial firms still have to buy more than 30% of their annual gas needs. 

A total of 63 percent of German industrial companies see high power and gas prices as a threat to Germany's competitiveness, according to the survey. 

Commenting on the poll, DIHK president Peter Adrian said "These are alarming numbers." 

The survey shows how high energy prices could permanently erode Germany's industrial strength, the association's president added. 

"Many companies have no choice but to close down or relocate production," Adrian said. 

Last week, German chemicals association Verband der Chemischen Industrie (VCI) warned that Germany's vast chemicals industry has few options left to conserve natural gas amid uncertainty over Russian supply, with German companies risking shutdowns of production in case the supply situation worsens. Germany's chemicals industry is the third largest industrial sector in Germany after the automotive manufacturing and machinery sectors. 

The possibility for saving gas is very limited, VCI's energy expert Jörg Rothermel told German radio WDR 5 Morgenecho in an interview earlier this month. The option is basically to forgo production, Rothermel added.  

By Josh Owens for Oilprice.com 

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