Long-term implications on global energy price levels will impact the European industry - how to act?

The prices for energy, in terms of electric power and natural gas, have changed fundamentally in 2022 and have risen rapidly, especially on the European market. Even before the Ukraine war, the EU started to add costly CO2 surcharges to energy, resulting in increased materials and energy costs.

Although energy costs have begun to decline after hitting an all-time high and dependence on the Russian energy market has been reduced, Europe's manufacturing companies continue to face strategic cost disadvantages. Energy costs within Europe will remain at a very high level due to the new energy mix and the impact on long-term procurement contracts. Therefore, companies have an acute need for action to counteract.

The price increase effect in 2022 had a strong impact on the production costs of energy-intensive industries such as steel, chemicals, and minerals. The individual industries and countries were faced with a margin decline of up to 65%. In order to mitigate this effect, various measures and subsidy packages have already been initiated by the respective governments.

Forecast for 2028 in terms of Natural Gas, energy costs will vary significantly over the next few years with break-evens between Asia/Pacific and Europe.  In the long term, Europe and China will converge to a high price level, whereas the Americas already offer price advantages and favorable conditions in the long term. For Europe, this implies reduced competitiveness.

In order to answer the key question of how a company can produce and source profitably in the future, taking into account energy price developments and risks, we have designed four major field of investigations. The first step is to calculate the individual effect of the price shift for each company and to derive various scenarios. Based on the existing global production network, the second field of investigation involves not only risk reduction but also a complete rethink of the footprint, product allocation, and the inclusion of new evaluation criteria.  We have developed individual roadmaps for our customers to set the strategic course for a successful future.

Working with the most qualified TSETINIS-EFESO Consultants is key to your success.

Speak with an expert in your industry who can help you move your company toward your specific goals. We implement our expertise in a very specific and targeted way and tailor the choice of methods to your individual requirements. In this way, we can ensure your long-term success.

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