# Gas price surge pushes Europe’s ceramics industry to breaking point Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-10-27 Category: BUSINESS Category URL: https://financedigest.com/category/business Meta Title: Europe's Ceramics Industry Grapples with Surging Gas Meta Description: Continental Europe's ceramics industry faces challenges as gas prices surge, impacting production costs and potentially leading to shut downs. URL: https://financedigest.com/gas-price-surge-pushes-europes-ceramics-industry-to-breaking-pointhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2021-10-27t134258z3lynxmpeh9q0twrtroptp4power-prices-ceramics-1736837513962-compressed.jpg) By Stephen Jewkes, Isla Binnie and Elvira Pollina MILAN (Reuters) – Continental Europe’s $35 billion ceramics industry thought the worst was over when sales jumped more than 10% in the first half of the year and order books began to fill up after the damage inflicted by the pandemic. But surging gas prices have caught out companies in an energy-intensive business, leaving them to choose between passing on higher costs to customers and scaling back or halting production. And all at a time when many feel [energy transition costs](https://www.financedigest.com/factbox-europes-efforts-to-shield-households-from-soaring-energy-costs.html "Factbox-Europe’s efforts to shield households from soaring energy costs") are already hurting them. [Iris Ceramica Group](https://www.financedigest.com/iris-software-group-acquires-ps-financials.html "IRIS Software Group acquires PS Financials "), based in the central region of Emilia-Romagna and one of Italy’s leading manufacturers in the sector, has had to introduce an energy surcharge of 3% on invoices to help cushion the blow. Reception has been mixed. Some clients realise we’ve done our best to limit price rises but others, especially the big bulk buyers, are interpreting contracts to the letter and asking for a pre-warning period,” [says CEO](https://www.financedigest.com/stanchart-ceo-says-at1-bond-wipeout-has-profound-impact.html "StanChart CEO says AT1 bond wipeout has profound impact") Federica Minozzi. It was Minozzi’s father Romano who first persuaded gas [transport group Snam to bring](https://www.financedigest.com/strikes-bring-londons-transport-network-to-a-halt.html "Strikes bring London’s transport network to a halt") its grid to the area in the 1980s, effectively launching Italy’s ‘Tile Valley’ district. Now his daughter is planning to build the [industry’s first green](https://www.financedigest.com/eu-announces-plans-to-lead-green-industrial-revolution.html "EU announces plans to lead green industrial revolution") hydrogen ceramics factory driven by a rooftop solar plant. The project, started before gas prices exploded, is easier to justify in the [face of higher gas prices](https://www.financedigest.com/bristol-myers-pfizer-abbvie-drugs-likely-to-face-u-s-price-negotiation.html "Bristol Myers, Pfizer, AbbVie drugs likely to face U.S. price negotiation"). In effect given [recent developments](https://www.financedigest.com/high-quality-low-voltage-motors-market-recent-industry-developments-and-growth-strategies-adopted-by-players.html "High Quality Low Voltage Motors Market: Recent Industry Developments and Growth Strategies Adopted by Players") production could become competitive from an economic point of view faster than we thought,” Minozzi said. Europe’s [ceramics industry](https://www.financedigest.com/advanced-ceramics-market-industry-outlook-growth-prospects-and-key-opportunities.html "Advanced Ceramics Market: Industry Outlook, Growth Prospects and Key Opportunities") guzzles gas to fire up furnaces and keep 200,000 direct workers in a job. [Energy bills](https://www.financedigest.com/energy-bill-support-pushes-uk-budget-deficit-to-february-record.html "Energy bill support pushes UK budget deficit to February record") nL8N2QM1BY typically account for up to 20% of overheads. With no [short-term solution in sight](https://www.financedigest.com/in-planning-for-today-dont-lose-sight-of-tomorrow-avoiding-short-termism.html "In planning for today, don’t lose sight of tomorrow – avoiding short-termism") the final quarter of the year could turn into a blood bath, warns Giovanni Savorani, the head of Italy’s Confindustria Ceramica federation. “It’s a total disaster. There are companies that [risk shutting down production and sending workers home because they can’t balance](https://www.financedigest.com/risk-of-uk-balance-of-payments-crisis-under-truss-is-rising-deutsche-bank-warns.html "Risk of UK balance of payments crisis under Truss is rising, Deutsche Bank warns") their books,” Savorani told Reuters. Italy, which with Spain dominates Europe’s ceramics trade, has [invested more than 2 billion euros](https://www.financedigest.com/germanys-merck-to-invest-300-million-euros-in-us-gas-plant.html "Germany’s Merck to invest 300 million euros in US gas plant") ($2.3 billion) in six years in new materials and technologies to help it compete with cheaper production from China, India and Turkey. After the headwinds of COVID-19, demand in the tiles business has [returned with revenues in Italy](https://www.financedigest.com/investor-appetite-for-italy-returns.html "Investor appetite for Italy returns") in the first six months up 12.3% on the same period in 2019. But the [rise in order books cannot keep pace with the impact of energy costs](https://www.financedigest.com/suedzucker-quarterly-profits-surge-73-5-despite-cost-rise.html "Suedzucker quarterly profits surge 73.5% despite cost rise"). I’m thinking of stopping things in [January because I can’t produce at these prices](https://www.financedigest.com/uk-shop-price-inflation-hits-record-8-in-january-brc.html "UK shop price inflation hits record 8% in January: BRC") and make a profit,”said Savorani, who owns his own company. CHEAPER RIVALS Natural gas [prices nL1N2QZ01Y have soared 300% this year to record highs in Europe](https://www.financedigest.com/tesla-expands-discounts-with-price-cuts-in-europe-singapore-israel.html "Tesla expands discounts with price cuts in Europe, Singapore, Israel") and parts of Asia as economies recovered from the COVID-19 pandemic and energy consumption increased faster than supplies. The increases have prompted energy-intensive industries like ceramics to review production to cope in a trend that is disrupting supply chains and [risks fuelling inflation](https://www.financedigest.com/high-inflation-recession-risk-widen-ecb-dilemma.html "High inflation, recession risk widen ECB dilemma"). Jose Luis Lanuza, Chief Executive of Spain’s Keraben Group, used to look at gas [prices once or twice a year](https://www.financedigest.com/hong-kong-home-prices-drop-15-6-in-2022-snap-13-years-of-gain.html "Hong Kong home prices drop 15.6% in 2022, snap 13 years of gain"), to help decide on structuring contracts for his wall and floor tile business. “Now I look at gas every day, hoping it goes down,” he said. We have no [alternative source of energy](https://www.financedigest.com/powered-by-poo-ten-weird-and-wonderful-alternative-energy-sources-that-could-soon-be-powering-our-homes-2.html "POWERED BY POO: Ten weird and wonderful alternative energy sources that could soon be powering our homes"). We have to buy gas.” In September Keraben, owned by Victoria Plc, spent seven million [euros](https://www.financedigest.com/iag-agrees-to-buy-80-stake-in-air-europa-for-400-million-euros.html "IAG agrees to buy 80% stake in Air Europa for 400 million euros") to fire up its 140-metre-long ovens compared to a monthly average last year of two million euros. He is now looking into partial stoppages in December, potentially cutting production temporarily by around 50% and bringing forward next [year’s holiday](https://www.financedigest.com/100-years-of-uk-holidaying-habits.html "100 YEARS OF UK HOLIDAYING HABITS") for employees. This could end with production going elsewhere, [outside Europe,”](https://www.financedigest.com/cargill-opens-new-brazil-pectin-factory-first-outside-europe.html "Cargill opens new Brazil pectin factory, first outside Europe") Lanuza said, mentioning Turkey, Poland, Vietnam and Mexico as potential alternatives. We are already looking at [investing outside of Europe](https://www.financedigest.com/factbox-companies-invest-in-ev-battery-factories-in-europe.html "Factbox-Companies invest in EV battery factories in Europe"). It pains me but it’s what I have to do.” Geert-Jan Starting, who runs a 165-year-old brick factory in the Netherlands, compares the crisis to World War One, when a [disruption of supplies of coal from Britain](https://www.financedigest.com/britain-facing-tomatoes-shortage-after-overseas-harvests-disrupted.html "Britain facing tomatoes shortage after overseas harvests disrupted") to the Netherlands led to a wave of bankruptcies. The [business survived two world](https://www.financedigest.com/be-the-digital-eyes-and-ears-of-your-business-from-anywhere-in-the-world.html "Be the digital eyes and ears of your business – from anywhere in the world!") wars and transitions from peat to coal and then to natural gas in the 1960s. But he’s now having to tell clients he can no longer [offer them price](https://www.financedigest.com/twitter-shares-cruise-towards-musks-offer-price-as-deal-deadline-looms.html "Twitter shares cruise towards Musk’s offer price as deal deadline looms") guarantees amid market volatility. I hadn’t seen this coming a few months ago, [price surges](https://www.financedigest.com/explainer-oil-price-surge-changes-ecb-narrative-only-at-the-margins.html "Explainer-Oil price surge changes ECB narrative only at the margins") of threefold or fourfold, and if you ask me what lies ahead, I have no idea. ($1 = 0.8593 euros) (Reporting by Stephen Jewkes and Elvira Pollina in Milan, Isla Binnie in Madrid, Anthony Deutsch in Amsterdam; Editing by Keith Weir and Emelia Sithole-Matarise) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---