Europe’s energy crisis is forcing factories to close

The furnace, heated to 1500 ° C, was glowing red. workers in Ark International The glass factory loaded it with sand that slowly gathered into a molten mass. Near the factory floor, machines transformed the shapeless liquid with a blast of hot air into thousands of thin glasses of wine, destined for sale in restaurants and homes around the world.

Nicholas Hoedler, CEO, wiped the assembly line, shimmering blue with a natural gas flame. For years, Arc was fueled by cheap energy that helped turn the company into the world’s largest producer of glass tableware – and a vital business owner in this working-class region of northern France.

But the impact of Russia’s sudden gas cut to Europe has thrown business into new dangers. energy prices It went up so fast that Mr. Hodler had to rewrite business forecasts six times in two months. Recently, a third of Arc’s 4,500 employees were put on partial leave to save money. Four of the nine factory furnaces will be out of order; Others will be converted from natural gas to diesel, which is a cheaper but more polluting fuel.

“It’s the most dramatic situation we’ve ever had,” said Mr Hodler, screaming to be heard over the din of cups. “For energy-intensive businesses like ours, this is disruptive.”

Sagittarius is not alone. High energy prices are hitting European industry, forcing factories to rapidly cut production and putting tens of thousands of employees on furlough. The cuts, although expected to be temporary, increase the risk of a Painful recession in Europe. Industrial production in the eurozone fell 2.3 percent in July from a year ago, and Biggest drop In more than two years.

Makers of metals, paper, fertilizers and other products that rely on gas and electricity to turn raw materials into products, from car doors to cartons, have announced they are tightening their belts. According to the British newspaper, The Guardian, half of aluminum and zinc production in Europe has been halted EuromitoxEuropean Metals Trade Association.

Among them is Arcelor Mittal, Europe’s largest steel maker, and idle blast furnaces in Germany. Alcoa, a global producer of aluminum products, is cutting a third of its production at its smelter in Norway. In the Netherlands, Nyrstar, the world’s largest zinc producer, has temporarily halted production until further notice.

Even toilet paper is not immune: in Germany, one of the largest manufacturers, Hakle, announced that it had fallen into bankruptcy due to a “historic energy crisis”.

The whirlwind alarmed the residents of Arques, a town whose fortunes have been linked to the glass industry for more than a century. The modern-day arch was founded in 1825 as Verrerie Cristallerie d’Arques and then was a small local maker of fine crystal goblets.

Today, Arc’s operations are massive, spanning an area roughly half the size of New York’s Central Park. It has grown to such an extent that Arc indirectly generates another 15,000 or so jobs in the region, from carton factories that pack their glass to carriers that move their products. Arc’s other factories are located in China, Dubai and New Jersey.

“The shutdown of the furnaces is bad news,” said one of the workers, a 28-year-old factory veteran, who spoke on condition of anonymity for fear of compromising his job. “High energy prices are certainly having an impact, but it’s scary how quickly they can happen,” he added.

To some extent, the crisis is a European reaction Penalties which was intended to punish Moscow for its invasion of Ukraine. The pain has undermined confidence in European companies and their ability to plan.

But the solutions may not be fast enough. Costs have already gone up far beyond what many manufacturers can afford. Thousands of European companies are nearing the end of fixed power contracts signed when prices were cheaper, and they must be renewed in October at current prices. Electricity prices for the next year, which are linked to the cost of gas, are around 1,000 euros per megawatt-hour in Germany and France, while natural gas is at an all-time high of about 230 euros per megawatt-hour.

Porcelain Eschenbach Germany survived the transition from communism to capitalism after 1989. But when its energy contracts expire at the end of this year, the company will face annual energy bills of 5.5 million euros, or nearly six times what it is paying now, said Rolf Froen, its director. .

“That means we have to double our prices, and no one is going to pay that for the cups and plates,” he said. Eschenbach, a 130-year-old company in the eastern state of Thuringia, is in talks with local politicians about a possible solution. It is one of dozens of small and medium-sized companies in Germany that fear having to close their doors for good.

An hour north of the bow factory Aluminum DunkerqueFrance’s largest aluminum producer will leave part of its 620-strong workforce and cut production by more than 20 percent as it faces a potential fourfold jump in energy costs.

“The time we spend dealing with energy issues has multiplied by 10,” said Guillaume de Jo, CEO. “We hope that the crisis will be short-lived, but if it continues, the European industry will be in very big trouble.”

Hodler is working to keep Arc out of trouble, after years of financial hardship linked to overexpansion, and most recently, pandemic shutdowns. In December, shortly after Hodler took over in a management reshuffle, Arc received a €45m emergency loan backed by the French state and is now asking the government for additional relief from its high energy bills.

The site, which consumes energy in up to 200,000 homes, makes “Arts de table,” including Luminarc dinner plates and Cristal d’Arques-branded crockery and flatware. Finally, Arc produces four million cups a day, as well as items such as candle holders for Bath & Body Works and promotional glasses for Heineken and McDonald’s.

Doing so requires intense heat to melt the sand into glass in furnaces that must remain lit 24 hours a day. In the summer, the energy crisis in Europe pushed Arc’s energy bill to $75 million, from €19 million a year earlier. Moreover, consumers suddenly stopped buying items such as candle holders and washers, for which Ark manufactures glass windows, leading to lower orders.

“People are worried about their winter energy bills, and they say, ‘I’m going to wait to buy this non-essential item,'” Mr. Hodler said.

The double whammy prompted the Arc management team to search for solutions – all of which are less than desirable.

This month, 1,600 workers were asked to stay home two days a week to cut costs. For the first time, arc furnaces will switch to diesel power instead of natural gas, which is fed directly to the plant via a pipeline. Diesel will increase Arc’s carbon footprint by 30 percent, and must be delivered in bulk by tanker trucks.

Even more difficult was the potential for arc furnaces to slow down. “You can’t just close a glass furnace,” said Mr. Hodler, “because it would destroy it.” “If they are turned off gently, they will survive, but then take more than a month to reheat.”

Mr Hodler said that two of the furnaces that were previously scheduled for scheduled maintenance may now remain unconnected for the foreseeable future. Two more will be paused to compensate for lower demand.

“We don’t want to stop operations completely,” Mr. Hodler said. “But we won’t produce if we lose money.”

All of the locals in Arques are very concerned. In Café Le Cristal, a hangout for the workers of the Arc factory, anyone had spoken about the fate of the ovens on a recent afternoon.

“The arch is the lifeblood of this area,” said Valerie Harley, owner of the café, which opened in 1939 and is named in honor of George Durand, who built the Crystalrie d’Arquis from a small factory into an empire. “If the ovens don’t work, the employees don’t either.”

Long-time resident Veronique Cognotti said locals are preparing for a domino effect. “A lot of other companies depend on it,” she said of the factory. “Carriers, carton makers – they will all feel the blow.”

At a nearby table, a man who spoke on condition of anonymity said he was fired earlier this month at a nearby carton factory that makes boxes and packaging for Arc, after the glassmaker cut production.

“With the price of energy the same, the plant isn’t operating as much as it once was, and it’s really creating a chain reaction,” he said.

He was paid 80 per cent of his salary to stay home while his factory was idle, but this added up to €130 in lost wages. At the same time, he said, the gasoline bill to fill up his minivan has jumped to nearly €100, from around €50 at the start of the year.

“This is going to become a much bigger problem,” he said.

Melissa Eddy Contributed to reporting from Berlin.