Europe's energy crisis will not lead to de-industrialisation. This is the view of Allianz Trade, a trade credit insurer.
In 2022, the growth of corporate utility bills in Europe was restrained. Some government programmes helped with this. But Allianz Trade expects utility prices to rise this year. Power prices will increase by less than 40% in Germany compared to 2021, and by 90% in Italy and Spain.
The recent drop in wholesale gas prices has raised hopes that the worst of the energy crisis in Europe is now behind us. But the situation in the gas (and electricity) market does not feed through rapidly to the real economy. Because corporate utility bills base on fixed prices and contracts.
But, this is not a game-changer for the price competitiveness
of European industry relative to that of the US. In Europe, price competitiveness is more sensitive to changes in labour costs and the exchange rate. And energy costs generally account for around 1-1.5% of production in the manufacturing sector. So, Allianz Trade notes that the energy crisis has not led to a trade diversion of manufacturing goods from Europe to the US.
The European manufacturing sector is generally doing well, except for the aluminium and steel industries. Aluminium production increased in North America and the Gulf countries but declined in Western and Central Europe. High regional electricity costs have led to the closure of steel mills. Steel production in Europe is also declining.
The energy crisis is affecting the profitability and investment of European companies. Allianz Trade experts estimate investment losses of €40 billion in France and £25 billion in the UK. There are also signs that Europe is losing market share. Countries in Asia, the Middle East and Africa are benefiting. European exporters from Ireland and Poland also managed to increase their market share in 2022.
Ukraine's export potential will be discussed at WINDO KYIV Conference IV on 10 February 2023.
Illustrative photo: Robin Sommer (с) Unsplash
The energy-price shock will lead to moderate production losses for European companies
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