The Spanish Association of Aluminum and Surface Treatments (AEA), which represents more than 600 companies in the sector, wishes to express its deep concern and call for immediate decision-making and the adoption of measures in light of the unprecedented energy crisis we are currently facing. Since last summer,we have been experiencing rising gas prices and emissions allowances, which—with the escalation of events in recent weeks following the invasion of Ukraine—have skyrocketed,pushing companies in the aluminum sector to the breaking point.
Europe in general—and the metallurgical sector in particular—has been facing an unprecedented surge in energy, raw material, and transportation costs for more than half a year.“All of this has put a strain on our companies’ balance sheets, putting them on the ropes, and leading far too many of them to question the viability of their operations. As a result, we are already beginning to see production halts at many of these companies or plant closures,” said AEA President Armando Mateos.
In less than a year, energy bill prices have risen by between 200% and 300%, putting the sector on the ropes.
Armando Mateos added “In recent days, we have experienced an unprecedented surge in electricity prices, which reached an all-time high on March 8, with the average price at 547 €/MWh. For companies like ours, where electricity is a key factor in our operations, this surge and price volatility can determine not only our competitiveness but, in some cases, our very survival.”
Companies face the dilemma of either passing these increases on to their selling prices or absorbing substantial losses for an indefinite period of time.Under current regulations, no one can guarantee that this cap will not be exceeded in the future, nor to what extent, nor for how long.
In less than a year, energy costs have gone from accounting for an average of 20–22% of a company’s total costs to tripling that amount.This percentage has continued to rise in recent weeks. Between the summer and December 2021,European aluminum producers’ electricity bills have risen by more than 300%,now accounting for more than 80% of the current selling price of aluminum.
At current prices, energy costs in Spain's aluminum sector will rise by more than 300 million euros—an amount equivalent to the cost of building four hospitals.
WithinSpain’s aluminum industry, the processing sector alone comprises 395 companies with 568 plants, providingdirect employment to more than 17,000 skilled workers. The sector’s aggregate revenue far exceeds 4,000 million euros.
Spain produces 10% of all rolled and extruded aluminum products in Europe(7.6% rolled and 14.2% extruded), making itthe third-largest aluminum processing country in Europe, very close behind Germany and Italy. The industry processes more than 1.3 million metric tons of aluminum per year, more than half of which is exported to the most competitive European and international markets, making it a net exporter with strong growth prospects.
At current prices, energy costs in Spain's aluminum sector will rise by more than 300 million euros—an amount equivalent to the cost of building four hospitals.
This is clearly demonstrated by the sector’s current situationin terms of demand, whichhas increased by more than 21% compared to pre-pandemic levels, highlighting not only the sector’s exponential recovery following the worst moments of the state of emergency, but also the potential of an industry that is increasingly in demand.
If this situation persists even a little longer, more companies will be forced to close or file for ERTE, given their inability to remain competitive amid the current energy costs. In the manufacturing sector alone, 10% of production is at risk; in terms of jobs, this would mean the automatic loss of 2,000 direct jobs held by specialized personnel.
Since October 2021 alone, and as a result of the dramatic rise in energy prices, Europe has lost more than 650,000 metric tons of its annual production capacity, despite the steady growth in demand for aluminum in Europe and worldwide.
But that’s not all;we are beginning to face a situation in which aluminum—a critical raw material—may no longer reach the most important value chains in Spanish and European industry, with the consequences this could have for the transportation, packaging, construction, machinery and equipment, consumer goods, and electrical engineering sectors of our economy and that of the eurozone. It is an entire chain whose balance becomes fragile if one of its components falls short of projections—as is already beginning to happen.
In addition to soaring energy and fuel prices, there are shortages and rising prices of other basic raw materials needed for production in the sector, making this situation increasingly unsustainable.On top of all this, competition with other markets for the same raw materials will become increasingly intense and difficult.
All of this is taking place at a time of growth for the sector, with demand up more than 21% compared to pre-pandemic levels; an exponential recovery for the sector following the worst of the crisis in 2020.
For months now, our industry has been required to make a tremendous effort to sustain itself. The new geopolitical situation affecting Europe has placed us in an even more dire, almost out-of-control situation, dragging us into a reality far beyond what an industry like ours can bear on its own under the current rules of the game.
AEA Secretary General Jon de Olabarria noted that “Many sectors of our industrial base are affected, but the situation particularly impacts companies like ours, given our high dependence on energy to carry out our operations. All of this makes this a crisis that requires solutions from the government as a matter of extreme urgency that cannot be postponed”.
The Spanish and European authorities must take immediate action in light ofan industrial sector that is at serious risk and requires stability in its production costs to overcome the current crisis, as it has no further room to maneuver with its current resources.
We need urgent measures that involve decoupling the price of electricity from the gas price on the bill in order to stabilize prices.Therefore, we call on the government to take decisive action before the European Commission to modify the marginal pricing system for electricity—if possible, permanently, since the system has proven ineffective—or at least temporarily.
We suggest implementing regulated prices for sectors that are extremely dependent on energy costs, on an exceptional and temporary basis, with a roadmap for their gradual phase-out.
We also believe it is appropriate to implement state aid for companies affected by high prices—such as those in our sector—in a manner consistent with the European Commission’s guidelines.
The new geopolitical situation affecting Europe has placed us in an uncontrollable situation, dragging companies in the sector into a reality far beyond what they can handle on their own under the current rules of the game.
We call on both the Commission and the co-legislators to act without delay and with unwavering resolve to protect European jobs and domestic aluminum production from further divestment, which could also jeopardize subsequent stages of the production chain.
At the same time,we call on the Spanish government to become fully involved in this matter and to take any other appropriate measures within its power to alleviate the current unprecedented energy crisis, giving them the strongest possible impetus.
In this regard, we demand that the collection fees charged on electricity bills—which are directly controlled by the Spanish government—be eliminated.There are no excuses, since the EU Energy Taxation Directive and the VAT Directive provide flexibility to member states in this regard.
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