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High energy prices, end of incentives worry Italian smelters


26 May 2023 08:06




26 May 2023 08:06

(Montel) Persistent high energy prices and the expected end of emergency energy measures have raised concerns about Italian smelters’ ability to remain competitive on the global market, said the country’s foundry association Assofond.

Despite the "normalisation" of energy costs, power and gas prices are still very high compared with those seen pre-crisis and the exceptional measures launched by the government last year are set to come to an end, Assofond’s president, Fabio Zanardi, said in a statement late on Thursday.

“Strong unknowns remain linked to the structural competitiveness of Italian and European foundries in the global context and to the resilience of the European economy with inflation and interest rates at current levels,” he said.

The smelters, whose total power consumption is larger than 1 TWh per year, faced production shutdowns last year as the Russia-Ukraine war caused a shortage of raw materials and skyrocketed energy prices to record highs.  

Price volatility
Italian power spot prices averaged EUR 303.95/MWh last year and EUR 125.46/MWh in 2021. Except for 2020, when the coronavirus pandemic drove prices down to a yearly average of EUR 38.92/MWh, Italian electricity prices have hovered around EUR 60/MWh since 2005. 

Currently, spot prices trade around EUR 100/MWh.

Meanwhile, Europe’s benchmark gas price, the Dutch TTF front-month contract, recently traded near two-year lows below EUR 25/MWh, but it still doubles the levels seen in May 2019. Last year, it peaked above EUR 300/MWh.

The Italian government enacted in 2022 several tax law measures in the energy sector, such as tax credit for energy-intensive companies to mitigate the increase in energy bills. Those measures have been extended until the end of June, but it is unclear whether they will be extended further.

Emergency measures tied to the energy crisis “must be assessed month after month with inflation data and monetary policy,” a source close to the government told Montel.

Earlier this week, the European Commission said EU countries should wind down their emergency support measures to counter high energy prices by the end of the year. 

Despite a strong Q1, in terms of production and turnover for the sector, Assofond warned about an initial slowdown in orders, “which inevitably weighs on sentiment”, it said.

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