European Industry Severely Impacted By Natural Gas Price Increases

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European Industry Severely Impacted By Natural Gas Price Increases

Over the past 14 days, the wholesale cost of natural gas in Germany has risen by more than 50%. This increase presents an extraordinary challenge for industry, and there is no sign of support or intervention from the government. Indeed, recent statements are destined to provoke a worsening of the situation. Kelheim Fibres is entirely dependent on natural gas for the generation of electrical energy and steam and has no viable short-term alternatives. In addition, the raw materials used by the company often consume high levels of energy in their production and are also increasing significantly in cost. These increases in cost jeopardise the future of the business if they cannot be passed on through the supply chain. Kelheim Fibres is calling on the Government of Germany to take immediate steps to mitigate the impact of the cost increases for natural gas and is committed to work to implement alternative sources of energy in the medium term. In parallel, the disruption to global logistic networks that has been seen throughout 2021 is now expected to continue throughout 2022. Massive increases in shipping rates – in some cases in excess of 80% – are being imposed without notice and with no opportunity for negotiation. These costs must also be passed on through the supply chain if businesses are to remain viable. To address these issues, Kelheim Fibres is implementing the following measures with immediate effect:

The increased cost of energy and freight will be passed on in prices to customers at the soonest opportunity;
If necessary, changes or adjustments to existing agreements will be negotiated to reflect the increased cost levels;
If the necessary increase in fibre prices cannot be secured, cuts to production will be implemented with the objective of minimising losses until the cost increases can be mitigated.

As the drivers for the increases in natural gas prices appear to be temporary in nature, the company will maintain any price adjustments under review and pass on any relief to customers. Craig Barker, CEO of Kelheim Fibres, describes the current situation as critical. “The cost increases we are facing are unprecedented and call for swift and decisive action. We are determined to take the necessary steps to preserve the future of our business and provide security of supply for our customers. At the same time, we are relying on the support of our customers to help us conquer the challenges our business is facing.”