Companies buckling under pressure of skyrocketing energy costs

Soaring electricity and gas prices have already led to the temporary shutdown of several Greek companies.

One food export company in northern Greece is a case in point. After negotiations failed with a major customer to adjust the sales contract to include part of the increased energy costs, it was forced to temporarily shut down for a week with the expectation, and hope, in the meantime, that there may be a de-escalation of prices or that measures are implemented at a European and national level to help businesses. 

Another indicative case was around 10 days ago, also in northern Greece, and concerns several dye companies that work with yarns and fabrics that were forced to pull the brakes due to the cost of natural gas for their operation, at 130 euros per megawatt hour. 

According to estimates by analysts, the reduction in production and temporary shutdowns will be the fate of many Greek companies in the weeks and months ahead, as a result of the Russian invasion of Ukraine and the severe western sanctions on Moscow.

As expected, these developments are particularly worrying for the Greek economy, due to the obvious risk it faces of losing important foreign markets and what this would entail for business viability, and for saving existing jobs. 

Before prices were skyrocketed even further in recent days, the energy costs of manufacturing companies, according to research data, had already increased by more than 40%. Production costs for more than one in five companies had risen in tandem by 22%.

Manufacturing companies across Europe are under similar very strong pressure from the protracted energy crisis. 

In the aluminum industry, for instance, more than 700,000 tons of production (about 35% of European production) have been lost since the fall, after the complete closure of two factories and the reduction of production by many others. European industries in the textile and cement industries have also seen production drop.

“These prices cannot be shouldered by any industry and temporary shutdowns will be inevitable,” said the president of the Industrial Energy Consumers Association (EVIKEN), Antonios Kontoleon, in comments to Kathimerini.

He added that price hikes in recent days are five times greater than the previous highs and unjustified.