🔋Plans=Foiled

Industrial metal plant shutdowns are telling of the energy struggles in Europe and likely serve as further headwinds for battery/EV production in the region.

Aug 24, 2022

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Industrial Metals

The European energy crisis has caused many issues from rising costs, energy rationing, and the return to dirtier fuels like coal. The saga unfortunately continues as plants for various industrial metals have shut down due to the high costs. Norsk Hydro will fully power down its aluminum smelter in Slovakia. Aluminum production is very energy intensive and ends up being used in construction, packaging, transportation, electricity, and batteries to name a few.

Tracy (𝒞𝒽𝒾 ) @chigrl

Norsk Hydro Shuts #Aluminum Plant as Europe’s Power Woes Deepen Company’s 175,000-ton Slovakian smelter will shut next month bloomberg.com/news/articles/…

Furthermore, the Budel zinc smelter in the Netherlands faces a similar fate. While not as energy intensive as aluminum, the costs have been enough of a burden for this plant. Zinc is the fourth most widely consumed metal and is used for steel production, alloys for various applications (brass, automotive, electrical), and rubber manufacturing. While not an important metal for batteries directly, the downstream effects on cars and wind turbines for example would still relate.

Wall Street Silver @WallStreetSilv

Another large zinc smelter in Europe will close indefinitely due to sky high electricity prices… The zinc market was already tight… this may also impact silver production as 35% of global silver supply comes as a byproduct of zinc and lead mining…

In addition to the woes in Europe, China has halted much of their industrial operations in the Sichuan region. This effects manufacturing for many things including industrial metals, lithium, batteries, electronic parts, and polysilicon.

Prof. Michael Tanchum @michaeltanchum

Even before the drought #China had a severe water problem in certain regions, now look at the Yangtze River 👇 ➡️CATL, the world's largest battery maker has suspended production due to the lack of hydropower

Chris Courtney @CJCourtneyWuhan

People walking on what would ordinarily be the bed of the Yangtze River at Wuhan. https://t.co/AUQMAh3Xvx

The US is not out of the woods either as a domestic aluminum mill is facing issues.

Jason Burack @JasonEBurack

And the US has on a global basis lower #electricity prices because of our higher #NaturalGas supply. A lot of #aluminium supply coming offline soon?

breitbart.comSecond-Largest U.S. Aluminum Mill Idles Due to ‘Untenable’ Energy Prices, Laying Off 600 American WorkersThe second largest aluminum mill in the U.S. has idled operations, laying off about 600 American workers, due to “untenable” energy prices.

Why Are They Shutting Down?

High energy prices in Europe have largely resulted from natural gas supply, disappointing French nuclear output, and policy resulting in reliance on Russia at a time they would prefer not to support. Heat waves and drought have also caused and are intertwined with many issues as well.

Javier Blas @JavierBlas

MAP OF THE DAY: Day-ahead electricity prices in Europe are eye-watering, with lots of countries setting record highs for today. Notable to see the Nordics close to €400 per MWh, and Germany at €600. Before 2020, anything above €75-100 was considered expensive| #EnergyCrisis

Low water levels make it hard to cool the nuclear reactors, exacerbating the problem in France. Low water levels impact shipping of things like coal and petroleum products inland.

While China has not had the same energy issues as Europe, they are suffering from drought that has caused low water levels. In the Sichuan region, 85% of the power is from hydro and that is severely restricted.

What’s Next

While the suspension from CATL will definitely affect batteries in the short term, the shutdowns from aluminum, zinc, and potentially more plants in the future will have reverberating effects into the long term. The sky-high energy prices in Europe are putting a major strain on industry. This alone will have severe economic consequences for the country’s GDP and prosperity of the people. While Europe is not in the top producers of aluminum, it goes to show the struggle the area is facing and will further increase the cost of making batteries/renewables in Europe.

Renewable technologies, cars, and batteries need lots of industrial metals like aluminum and many applications require steel production. Prices for commodities have gone much higher over the last year, and recent shutdowns and suspensions of plants will only exacerbate the supply problems into the future. This provides a very bleak prospect for prices of batteries to stay low or decrease heading into the future, as if they didn’t already face issues with the battery specific materials (lithium, nickel, graphite, etc.).

Mixed signals about Germany restarting its nuclear fleet, Nordstream pipeline scheduled for further maintenance, and low water levels do not bode well for European energy prices in the short/medium term. As far as the shutdown of industrial manufacturing, more shutdowns or nationalization could be on the way for others. These issues continue to provide headwinds for the price of batteries into the future.