According to Feralpi Steele, every day is a battle.
German construction steel manufacturer Feralpi Stahl (Feralpi Steel) continues to serve the market by reducing CO2 emissions, CEO Uwe Reinecke told Fastmarkets at an industry event earlier this month.
The company achieved this despite difficult conditions characterized by unstable energy prices, transportation difficulties, reduced scrap supplies and limited support from governments and consumers, he said during the wire and pipe exhibition in Dusseldorf on April 13-17.
"Every day is a serious challenge. Every day is a battle," Reinecke said of the challenges the company faces on a daily basis.
Lower energy costs
Of all the problems, price pressure has become the most acute in recent months, with energy becoming one of the most important issues. The escalation of geopolitical tensions in the Middle East has led to instability in the global gas, fuel and electricity markets. This has led to higher energy prices across Europe and has put additional strain on steel producers such as Feralpi, which use electric arc furnace (EDP) processes.
"We have three main types of costs," Reinecke said. "The cost of scrap metal, the cost of energy, and then there are the personnel costs. Staff costs are in third place."
According to Reinecke, before the start of the current US-Iranian conflict, gas prices in Germany were about 32 euros ($38) per MWh, but jumped to 45 euros ($53) per MWh the day after the outbreak of hostilities.
"We are seeing an increase in natural gas prices by more than 30%, while electricity prices have increased significantly, because in Germany electricity prices are still mainly determined by marginal prices for fossil fuel electricity generation," he added.
Feralpi and other member companies of the German National Steel Industry Association have asked the government to set a target price for electricity at 50 euros per MWh, which is equivalent to 0.05 euros per kWh.
"But when I look at my calculations, they depend on daily prices," Reinecke said. "With all the additions in accordance with the German rules, I get 0.08-0.09 euros per kWh. The difference with the target price is 0.03-0.04 euros per kWh, and it changes daily depending on the actual prices the next day."
Even with lower energy prices during peak hours, which is an advantage of EDF-based production, in reality, German manufacturers have only one way out - to shift higher costs to consumers.
"With EDP, we can react very quickly – stop the furnace or