Spanish Industry Warns of Production Cuts Amid Rising Energy Costs

The Spanish industry is sounding the alarm over rising energy prices, warning that if costs remain at current levels, some companies may be forced to reduce production or halt certain production lines during the autumn. This threat comes from various sectors, with steel and chemicals being among the most exposed due to their high electricity and gas consumption.

The Alliance for the Competitiveness of the Spanish Industry estimates that the Middle East crisis could add nearly 7.4 billion euros to the energy bill of the Spanish manufacturing industry by the end of the year. Of this amount, about 4.22 billion would correspond to gas and 3.175 billion to electricity.

The steel industry requires large amounts of electricity, with electric furnaces melting scrap metal at a cost directly tied to megawatt hour prices. Companies compete in international markets, making it difficult for them to pass on increased production costs to customers. The chemical industry also relies heavily on both electricity and gas, with some processes using gas as a raw material.

The ceramics industry is particularly dependent on natural gas for kilns and dryers, accounting for over 90% of its energy consumption. Despite efficiency improvements, the energy cost per square meter produced has continued to double pre-crisis levels. The sector experienced similar concerns in 2022 due to prolonged rise in gas prices, leading some companies to reduce production and resort to temporary employment files.