Confindustria Ceramica

forno-energia-gasby Nicola Tedeschini15   Dicembre   2017

Southern European ceramic producers burdened with high energy costs

A European Commission dossier reveals differences in natural gas and electricity prices

European ceramic producers pay 4.6 times more for natural gas and 2.5 times more for electricity than Russian groups operating in the sector. Likewise, US companies in the sector benefit from lower energy prices than their European competitors, 35% less in the case of gas and 13.9% less for electricity. These figures were revealed in a report on high energy-consuming industries drafted by the European Commission prior to the presentation of Clean Energy for all Europeans, a package of measures aimed at encouraging the use of clean energy sources.
The European data included in the Commission’s dossier are mostly based on a sample of 22 factories (apart from a portion of the survey which covered a smaller sample). Although the above-mentioned figures refer specifically to 2015, there is no reason to believe that the situation has changed much since then. Indeed, in the seven previous years energy prices paid by ceramic wall and floor tile manufacturers had remained stable or increased, equivalent on average to at least half of EBITDA and 20% of total production costs.
 

The situation is rather paradoxical in that the period coincided with the double-dip recession and saw central banks and governments fighting tooth and nail to counter the risk of deflation. Moreover, the European energy markets took major steps forward in the process of liberalisation, which at least in theory should have led to lower prices (the separation of Eni and SNAM in Italy is an example). At the same time, manufacturing districts like that of Sassuolo have continued to invest in improving the energy efficiency of their factories.
The real point here is that due to – or perhaps in spite of – the recession European ceramic companies have faced rising costs of non-energy components, including network and transport costs, taxes and parafiscal charges (VAT is not included in the analysis). The cost of electricity includes a contribution towards renewables.
In 2008 one megawatt-hour of natural gas in Europe cost on average €29.7 compared to a “net” cost of €27.9. In 2015, the same indicators stood at €29.9 and €27.2 respectively. This means that the incidence of non-energy components rose from around 6% to more than 9% of the average final price, which fell significantly below the €30 mark only in 2012.
The electrical energy segment shows even greater divergence. Before the recession the gross price of one megawatt-hour of electricity was €72.1, and since then has fluctuated between €58 and €62. The only exception was in 2013 when there was a temporary upturn (€68.1), although this fell short of a return to pre-crisis levels. While average total cost in 2008 was €93.5, seven years later it had risen to €104.7. Of this, no less than €43.8 was attributable to non-energy costs, 42% of the final value of the supplied energy.
 

Extending the analysis to a comparison between two different regions of Europe offers further insights. The price of one megawatt-hour of natural gas paid by ceramic companies in Central and Eastern Europe was well below €28 in 2014 and 2015, whereas in Southern Europe it was higher than €30. This gap is of course largely due to different bare costs, but while transport is more expensive for central European tile producers, companies operating south of the Alps are burdened with tax of almost 2.5% of the final price compared to just 0.8% in the rest of Europe.
The gap within Europe has also widened in the case of electricity, which despite the downward trend mentioned above has remained significantly more expensive in the southern than in the central and eastern regions of the continent. Additionally, ceramic tile producers in Southern Europe had to pay on average €45.2 per megawatt-hour for non-energy components in 2015 compared to just €32.4 euro in the rest of the continent. Seven years earlier the same indicators stood at €21.6 and €19.8 respectively, underscoring the fact that the cost of non-energy components has risen much more rapidly in the Mediterranean countries.


NOTE
On 30 November 2016 the European Commission published the Cleaan Energy for all Europeans package, which as one of the priority goal pursues “providing a fair deal for energy consumers”. Among others the package contains a Report on the Energy prices and costs in Europe (COM (2016) 769) and an accompanying Staff Working Document (SWD (2016) 420), which gathers the results of the Commission studies on energy prices and costs.