European Manufacturers Consider Moving to U.S. Due to Soaring Energy Prices
- September 23, 2022
- Posted by: Quatro Strategies
- Category: Manufacturing
European industrial production has been hit hard by soaring energy prices, as the continent is bracing for a recession. While many businesses have had to shut down, some companies have started to reach the conclusion that they should find greener pastures, primarily the United States. Earlier this month, steel giant ArcelorMittal announced it would slash production by half at a steel mill in Germany and a unit at another plant, also in Germany. The company cited high gas prices for its decision.
ArcelorMittal also announced its projection of steel output in the fourth quarter this year to be 1.5 million tons lower than it was in the same period last year, again citing high energy prices.
Those announcements came after the company said earlier this year that it would expand operations at its Texas plant. It described the state as “a region that offers highly competitive energy and, ultimately, competitive hydrogen.” It is just one of the Europe-based companies that are beginning to see the benefits of growing in the United States.
Industry executives say it is not exactly a hard decision to make. It is a decision between folding in the face of exorbitant energy bills and moving to a much cheaper energy environment, complete with fresh incentives for certain industries.
Chemicals, batteries and green energy are all expected to benefit greatly from the Inflation Reduction Act, signed into law by Biden last month. It is no wonder therefore that companies operating in those industries see it as a good idea to either move or expand in the United States.
Meanwhile, companies in Europe have started more and more to switch into survival mode, especially at a time when they have to renew their electricity supply contracts with utilities. Because of the energy inflation, these are set to be much higher than the contracts for the current year, with front-year prices reaching over $1,000 in France and Germany.
Energy-intensive industries such as manufacturing and fertilizer production are especially vulnerable simply because of their higher energy needs.
The European Commission has pledged to help by capping the revenues of electricity generators that use a primary source of energy other than gas, and taxing the “excessive” profits of oil, gas, and coal companies.
The Commission plans to collect around €140 billion to distribute among households and struggling businesses. However, ths may not be enough to save companies. Europe’s aluminum industry group, European Aluminum, even said energy costs could result in the breakdown of the aluminum industry in Europe.
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