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Business & Economy14 september, 2022

Energy crisis in Europe affects all production from beer to tomatoes

European energy crisis is beginning to hit sectors far beyond house utilities and energy-intensive industries. This trend is likely to intensify. That’s due to the temperature restrictions being introduced. As well as the need for household heating.

Energy crisis in Europe affects all production from beer to tomatoes

Breweries

Belgian brewery Delirium Tremens faces a real risk of shutting down production for the first time in over a century. This is due to a shortage of liquefied carbon dioxide. Brewers use it to make beer.

The Belgiuan Huyghe brewery, located in Melle, was also considering shutting down. After the 13-fold increase in prices for liquefied carbon dioxide, brewers found the situation hopeless. Alain De Laet, owner of the brewery, said CO2 supplies could run out this week. This would cause a shutdown for the first time since 1906. At least until the brewery finds a plan B.

Huyghe Nippon Gases, is supplier of liquefied CO2 for the brewery. It raised prices from 250 to 3350 euros per ton.

This increase is explained by a simple fact. The production of ammonia at a plant in the Netherlands by the Norwegian fertilizer manufacturer Yara International ASA was stopped. Currently, gas-based production in Europe is not profitable. Tiffany Stefani, Yara’s vice president of European government relations, explained this in an email. “We continue to monitor the situation and adapt our production.”

Energy crisis across Europe

This situation illustrates how interconnected Europe’s economy is. Ammonia, which is made from natural gas, has been hit hard by a price hike caused by Russia’s decision to cut gas supplies in response to sanctions related to the conflict in Ukraine.

Belgian brewers are not the only ones experiencing difficulties. The Danish concern Carlsberg also attributed the problems in production in Poland to a shortage of liquefied carbon dioxide. “A couple of months ago, the industry worked like a Swiss watch. The new situation with rising gas prices has affected the entire production chain. That’s reflected in the final cost,” said Krishan Modgal, head of the Belgian Brewers Association.

Food manufacturers

This sector is also experiencing difficulties due to first a strong reduction, and now a complete cessation of Russian gas supplies. The reduction in CO2 caused by this suspension affects food producers as much as it does for brewers.

Carbon dioxide is a vital part of the food industry. It is used to stun livestock before slaughter. It extends shelf life of products. And is also used as dry ice to keep food frozen during transportation.

Thus, the British food delivery service Ocado Group Plc has already said that the rise in the cost of electricity and dry ice will affect profits in the fourth quarter.

At the same time, Germany’s Wittenberg Gemuese – a producer of tomatoes, strawberries and peppers – was left without heating and hot water for greenhouses. Germany’s largest ammonia producer SKW Piesteritz GmbH stopped production in early September. “Without heating, nothing works here,” said Kevin van Eyperen, the facility manager.

The shutdown of SKW Piesteritz GmbH itself has other negative consequences for the German economy. The company covers about 40% of Germany’s demand for AdBlue, an additive used to reduce the harmful effects of diesel vehicle exhaust fumes. Shortages can cause trucks to stop deliveries. The largest ammonia producer is negotiating state aid.

Swedish bakeries have not escaped the problem either. One of the largest, Pagen, warned of a possible reduction in supplies due to a sharp increase in electricity prices and the risks of power outages.

For example, a one-second power outage in June affected Pagen production for four weeks. Berit Apelgren, Head of Communications and Sustainability at Pagen, told local media about this. He also added that repeated shutdowns would have an overwhelming effect.

Can this energy crisis be solved?

For its part, the EU is trying to stop the energy crisis caused by the reduction in gas supplies from Russia, since the Russian Federation covered about 40% of the bloc’s fuel needs last year. European Commission President Ursula von der Leyen is set to propose a mandatory target to reduce energy consumption on Wednesday, September 14, along with measures to redirect energy companies’ profits to consumers in need.

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Author: Данила Пушной

Source: Bloomberg

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