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German industry to pay 40% more for energy than pre-crisis – study says

by Matthew Atungwu January 30, 2023
written by Matthew Atungwu January 30, 2023
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A study released on Monday by Allianz Trade says the German industry will pay about 40% more for energy in 2023 than it did in 2021, before the energy crisis brought on by Russia’s invasion of Ukraine. Contract expirations and delayed wholesale pricing effects are to blame, along with increased demand, for energy, the study found.

The large energy-price shock still lies ahead for European corporates,” said Allianz Trade, the credit insurer that changed its name from Euler Hermes last year.

In 2022, higher corporate utility bills were contained as long pass-through times from wholesale markets and government interventions mitigated the immediate hit from surging prices as Russia curbed fuel exports to the West.

The price increases will hit corporate profits across Europe by 1-1.5% and lead to lower investment, which in Germany’s case would amount to 25 billion euros ($27 billion), Allianz Trade estimated.

Read also: Research says US renewable energy farms outperform Coal plants economically by 99%

German companies’ finances are robust, however, and a state-imposed gas price cap would help, it added.

Fears of the crisis could lead to de-industrialisation and a loss of competitiveness against the United States were overdone because labour costs and exchange rates have a bigger impact on manufacturing than energy prices, the study said.

Also, while exporters were losing market shares in areas such as agrifood, machinery, electrical equipment, metals and transport, the relative beneficiaries tended to be Asian, Middle Eastern and African, not American, it added.

The German government’s one-off payment to help private households and small businesses with gas prices – the first stage of a package that will be complemented with retroactive price caps kicking in in March – has cost 4.3 billion euros so far, the economy ministry said on Saturday.

Berlin has earmarked 12 billion euros for the payment, but the ministry said 4.3 billion euros was not the final cost as many eligible firms had not yet applied for the aid. They have until the end of February.

This story was adapted from MSN.

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