The energy crisis continues. European industrial strength may be significantly weakened.

Nov 20, 2022

Governments across Europe have mandated industrial companies to save energy due to rising costs caused by energy supplies reduction. In the 3rd quarter of this year, the demand of natural gas and electricity for industrial use in Europe declined, which will help Europe overcome the energy crisis. However, analysts pointed out that the reduction in industrial energy consumption is not only the result of energy conservation, but also one of the reasons for large-scale shutdowns.

Economists and industry groups have warned that Europe's industrial base could be severely weakened if high energy costs persist. Enterprises in energy-intensive industries are accelerating their outflow to countries and regions with lower energy prices.


According to Reuters, European industrial activities now fell to its weakest level since May 2020, suggesting that the continent may be headed for recession. The International Energy Agency estimates that European industrial gas demand fell 25% year-on-year in the 3rd quarter. Some analysts believe the drop is undoubtedly the result of widespread shutdowns and cannot be achieved by energy savings alone.


Economists say European industry has for decades shifted production to places with cheaper labor to cut costs, and the energy crisis has exacerbated the exodus.


According to Reuters analysis, European energy-intensive industries, such as aluminum, fertilizers and chemicals industries, may have companies permanently relocating production to areas with good energy prices. The weather in Europe was unusually warm in October this year, and the winter is not expected to be too cold. Energy prices are expected to fall, but the cost of gas used by companies in Europe is still about five times that of their counterparts in the United States.