Cheap Natural Gas Does Not Solve the European Industry Crisis

Europe's Energy Crisis: Cheap Natural Gas is Not Enough

Europe is facing the risk of losing its industrial core due to high energy costs that have persisted for years. Even the lowest seasonal natural gas prices since 2020 are not enough to reopen closed factories. The struggling businesses on the continent are grappling with many new issues that cheap energy alone cannot solve.

Structural Challenges and Loss of Competitive Advantage

Raoul Ruparel, Director of the Boston Consulting Group Growth Center, states, "If you have made the decision to move production to a cheaper location, you will not automatically return due to short-term fluctuations in energy prices. This holds true as Europe has broader structural issues regarding its competitiveness."

Increased Competition

Intense competition from the US and China is weakening Europe's industrial advantage. New tariffs imposed during the Donald Trump administration further negatively impacted European exports. Heavy industries like steel and chemicals, which benefit the most from low energy costs, are struggling to cope with increasing emission regulations.

Factory Closures and Capacity Decline

Following Russia's invasion of Ukraine, natural gas prices surged from 20 euros per megawatt-hour in 2021 to 345 euros in 2022. This cost increase has rendered Europe non-competitive globally. Chemical giant BASF plans to close some of its units in Germany by September 2024 and increase investments in China.

DOW Inc. has reported that it will shut down its three most energy-intensive facilities in Europe next year. Thyssenkrupp Electrical Steel GmbH will temporarily close two of its factories in Germany and France.

Closed Capacity Issue

Germany's chemical plants operated at only 70% capacity in 2025, the lowest level in the past 20 years. Tilo Rosenberger-Süß, a spokesperson for InfraServ Gendorf, emphasized that Europe's energy costs are still three times higher than those of its US competitors.

Global Energy Prices and Investment Decisions

Markus Beyrer, General Director of BusinessEurope, stated, "The differences in energy prices with the US and China are a significant factor in companies' investment decisions in Europe." Morgan Stanley commodities strategist Martijn Rats noted that even with falling natural gas prices, Europe's competitiveness has not yet improved sufficiently.