Despite a slight uptick in industrial consumption of natural gas this year, Europe’s heavy industry is likely to return to curtailing gas use next year amid a tighter gas market and higher prices, analysts and industry officials have told Bloomberg.
Since the 2022 energy crisis, European industry has been squeezed amid sky-high energy costs and weak industrial demand in weakening economies. European companies have been losing competitive advantage to firms outside the EU, especially in Asia, with its low labor costs, and the U.S., where gas prices are four times cheaper than in Europe.
Globally, gas demand is picking up this year at a stronger pace than in the past two years and is set for a record high in 2024 and 2025, the International Energy Agency (IEA) said in a report earlier this week.
Europe’s industrial gas demand is recovering as prices normalized and is also contributing to demand growth, even though it remains well below its pre-crisis levels, the IEA said in its annual Global Gas Security Review.
However, after this year’s uptick in European industrial gas demand, consumption is set to fall in the coming years, as companies will continue to struggle with higher energy costs compared to other regions, and weaker economies.
Next year, industrial gas demand in Europe is expected to be 21% below the 2017-2021 average, due to weak economies especially in Germany, Energy Aspects analyst Erisa Pasko told Bloomberg.
Cefic, the European Chemical Industry Council, said in its September monthly report that “Energy is still more expensive than before the crisis and not competitive on a global scale.”
“EU gas prices – currently 4.7% times higher than in the USA – need to decrease, and overall business confidence in the chemical industry needs to improve,” the chemical industry body said.
Despite some improvement earlier this year, capacity utilization in Europe’s chemical industry of 75.2% remains well below the long-term average of 81%, Cefic said.
Story By oilprice.com
