Aluminum smelter struggles to survive in Europe’s gas crisis

  • Family-owned aluminum foundry tests new shift pattern
  • Plan to maintain production and reduce gas use
  • Automakers warn production cuts are inevitable if suppliers close
  • New non-gas technologies will take years to scale up
  • Suppliers need more help to innovate, says industry

SOLTAU, Germany, Aug 9 (Reuters) – Shouting above the din of machinery, Gerd Roeders is reluctantly preparing for the temporary closure of his German aluminum smelter to survive Europe’s growing gas shortage.

Roeders hopes that by moving the 200-year-old plant to three weeks of 24-hour shifts followed by a one-week shutdown, he can maintain production while lowering his gas bill, which has doubled since last year to $12.3 million. euros ($12.6 million).

Without tough decisions, he fears this will triple or even quadruple by 2023.

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The plan will save the cost of the gas needed to light the ovens each morning, Roeders figures, even if it means paying staff at the family-owned GA Roeders company more to work night shifts.

The survival of GA Roeders GmbH and 600 other foundries in Germany, most of which are small and medium-sized companies with fewer than 250 employees, will mean cost cutting and difficult negotiations with customers.

“We lend our prices to customers and tell them they have to pay more,” Roeders, 59, told Reuters as workers prepared the plant for the first week of rest. “We can’t deliver parts if we invest and don’t earn anything.”

GA Roeders, with plants in Germany and the Czech Republic employing around 500 people, produces more than 1,000 parts. Serves automakers like Volkswagen (VOWG_p.DE) and continental (CONG.DE)airline manufacturers and medical technology companies, with annual revenues of €60 million.

While smelters’ contracts typically include a clause that allows them to charge more when the cost of metal rises, there is no such clause for energy.

Roeders said he has always sought to be frugal with energy, the company’s second-largest expense after staff, a habit he picked up from his father, who turned off office computers at night and turned off lights during breaks to work. lunch.

But the firm now faces unprecedented increases.

The price of the Dutch first-month TTF gas contract, the benchmark for Europe, has almost tripled since the beginning of the year due to slowing Russian gas deliveries via Nord Stream 1 and a tight global market. read more

And while the company still has a 30,000-litre oil tank on site, which hasn’t been used for years, using it again would feel like a step backwards, Roeders said.

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Germany’s energy regulator is pleading with businesses, the government and consumers to cut their gas consumption and has asked larger companies to come up with emergency plans to cut usage further in the winter.

However, the CEOs of German car manufacturers, including Mercedes-Benz (MBGn.DE) and Volkswagen (VOWG_p.DE) they have warned in recent weeks that keeping production levels under contingency plans will only work if their suppliers can continue to deliver parts.

Producers of aluminum, steel and glass essential to car manufacturing are even more reliant on natural gas than automakers themselves, raising fears of a domino effect on their global customer base if they are forced to halt production.

German auto component makers sell to more than 3,000 direct customers in the United States, Europe and Japan and their products reach more than 100,000 second-tier customers, estimates supply chain analytics firm Interos.

‘DRESS HOT’

The energy crisis is the latest in a series of upheavals, from carbon emissions curbs and supply chain bottlenecks to tougher due diligence laws, that small businesses say they will struggle to overcome without more support.

“Conversion to electrically powered units requires massive renovation and is at best conceivable in the medium term,” said a spokesman for the German Foundry Association.

“Currently there is no technology available other than starting machines with gas,” the spokesperson added.

Together with an alliance of other aluminum manufacturers and a university, GA Roeders received government funding to design a prototype smelter that could operate on a mixture of 30%-40% hydrogen and 60%-70% gas.

The goal is eventually to run exclusively on hydrogen.

Interest in the project has mushroomed since Russia’s invasion of Ukraine, Roeders said, but there are still many hurdles before it can go live, from scaling up the technology to setting up a hydrogen charging network.

“Industrializing something like this usually takes at least five years,” he said. “We’ll have to bundle up, we won’t have a hydrogen furnace yet.”

($1 = 0.9794 euros)

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Reporting by Victoria Waldersee, Martin Schlicht, Fabian Bimmer and Fanny Brodersen

Our standards: The Thomson Reuters Trust Principles.

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