Increasing competition weighs on natural gas price for German industrial buyers

Increasing competition among German natural gas suppliers continues to pressurise prices for industrial buyers, according to a study conducted by the Germany’s association of energy consumers (VEA).

Over the past six months, the price of gas delivered to companies under supply contracts dropped by 2.6%, VEA said. In its study, the association compared 15 supply contracts with a runtime of 12 months, starting from 1 April 2014.

VEA said that buyers which are not stuck in long-term agreements should consider switching their supplier in order to profit from the increase in competition. It added that the gap between the most expensive and the cheapest supplier remains significant, currently standing around €5.10/MWh or 16.7%, which puts the price range paid by industrial buyers at €30.54-35.64/MWh.

This is significantly more expensive than the prices recently seen at Germany’s trading points. Over the past winter, traders paid an average of €25.84/MWh for Day-ahead gas at the NCG hub, ICIS data show.

This price gap is mainly due to the fact that the association’s study focussed on relatively high-priced all-inclusive packages, which contain the price of transport and a service charge. While these contracts still exist, more and more German industrial buyers have recently been shifting their procurement models away from these all-inclusive packages towards more flexible models.

According to a recent ICIS study, a growing number of smaller participants are benefiting from increasing competition among suppliers which have started offering attractive framework contracts, sometimes with 100% volume flexibility ( see ESGM 25 February 2013 ). These agreements allow customers to make their own buying decisions on the spot market with the deals executed through their supplier’s trading desk. Johanna Blackader