The global energy crisis has intensified and impacted many industries. Media quoted informed sources as saying that Britain’s largest newsprint manufacturer is considering reducing production this winter due to soaring energy prices.
Palm paper Ltd., a subsidiary of papierfabrik palm, is the largest newsprint manufacturer in the UK. According to people familiar with the matter, palm did not fully hedge its natural gas procurement this year due to the poor production outlook due to the previous epidemic blockade risk. Therefore, palm may need to limit the output of some factories or temporarily shut down some factories.
Earlier this year, the threat of epidemic blockade in Europe and the UK troubled the planning of palm and other manufacturers. As the hedging position is usually set several months before actual production, and enterprises are not sure whether European economies will blockade again, many enterprises are not prepared for hedging protection of resource procurement.
Britain’s energy crisis is getting worse. Due to the high energy cost, many industries have to choose to reduce production, and some enterprises are also in financial crisis. The UK business secretary Kwasi kwarteng is discussing with energy intensive enterprises how the government can help them survive the supply crisis, as the arrival of winter may further push up fuel costs.
European natural gas prices have nearly tripled this year. According to people familiar with the matter, natural gas accounts for slightly less than one-third of palm’s input costs. As the natural gas price may rise further, it means that the cost will rise further.
In 2018, palm established its own gas plant in the UK to run the world’s largest newsprint machine, which can produce 400000 tons of paper per year.
“Energy and recycled fiber are the two main costs (factors) affecting newsprint production,” palm CEO recently said. “The costs of these two commodities are affected by global supply and demand, which makes pricing particularly unstable and unpredictable.”
Many industries have been hit by the energy crisis
Paper industry is only one of the many industries that have been traumatized under the energy crisis. Last month, CF industries holding Inc., a major fertilizer producer, suspended the operation of two UK plants due to high natural gas prices. The production reduction of fertilizer manufacturers has led to a reduction in the supply of carbon dioxide (a by-product of fertilizer production), which has an impact on the food industry.
In fact, even if some enterprises take hedging and protection measures for energy procurement, higher costs are inevitable.
Generally speaking, enterprises purchase energy about a year in advance, so when these contracts end, they will still face higher costs, because there is no sign that the current energy crisis will end soon.
Post time: Oct-26-2021