Germany’s gas-thirsty chemicals still at risk of shutdowns – analysts

MADRID (ICIS)–Risks of shutdowns in German chemicals plants dependent on natural gas for electricity production during the winter remain, despite storage levels at highs and gas prices in Europe easing, according to analysts at Oxford Economics.

The 27 countries in the EU managed to fill up their gas storage facilities ahead of target, including its largest economy Germany, but the risk of gas rationing in the winter still exists – unusually cold weather and a worsening in the energy crisis caused by the war in Ukraine could quickly change the scene.

In a report published on 3 November, analysts at Oxford Economics said chemicals remains one of the sectors most at risk from natural gas rationing, together with other energy-intensive sectors such non-metallic minerals, metals, food, and fuel refining.

The assumption by the analysts is that industry will bear the brunt of a rationing policy because industrial players are the biggest gas consumers in absolute – rather than relative – terms.

In addition to those industries for whom production is gas-intensive, industries with lower intensity but a high absolute demand for gas are particularly at risk in a gas rationing scenario

This would be the case for Germany’s chemicals industry. Its gas intensity is low compared with other European countries, but its demand for natural gas as a method for electricity production is the highest in the region.

“The German chemicals industry has a middling gas intensity compared to others across Europe, [but] is nevertheless one of the highest absolute industrial consumers of gas in Germany, and indeed across the entire continent,” said Oxford Economics.

Mtoe: million tonnes of oil equivalent; GVA: gross value added
Source: Oxford Economics/International Energy Agency

Mtoe: million tonnes of oil equivalent; GVA: gross value added
Source: Oxford Economics/International Energy Agency

“Consumers of large quantities of gas are naturally vulnerable to a rationing regime, as large quantities of gas can be saved by targeting rationing measures at large industrial consumers in absolute terms. If the industries in question are unable to substitute away from gas they may face industrial shutdowns,” the analysts added.

Chemicals ranks sixth among European industries in its gas intensity, and well above the average manufacturing gas intensity.

Mtoe: million tonnes of oil equivalent; GVA: gross value added
Source: Oxford Economics/International Energy Agency

Within chemicals, however, there are large variations among countries. According to the analysts, one reason for that could be the differences in production efficiency across Europe.

But in other cases, it could be explained by a greater proportion of the chemicals sectors being made up of pharmaceutical manufacturing, which has lower gas intensity, as opposed to more basic chemicals manufacturing which has greater intensity.

“For example, the Netherlands’ chemicals and pharmaceuticals sector is made up approximately 83% of chemicals and 17% of pharmaceuticals, whereas the UK’s shares are 50% and 50%, respectively,” said the analysts.

In an analysis of the top 10 manufacturing consumers of gas in Europe, chemicals came up in the first four positions and in six places in total.

Country	Industry	Mtoe*
Germany	Chemicals	8.4
Netherlands	Chemicals	4.6
France	Chemicals	4.3
Spain	Chemicals	3.1
Spain	Refining	2.9
Germany	Food	2.8
Germany	Non-metallic minerals	2.5
Belgium	Chemicals	2.3
France	Food	2.3
Poland	Chemicals	2.2
*Mtoe: million tonnes of oil equivalent

Focus article by Jonathan Lopez