# German heat pump bonanza test industry’s resilience in Russian gas crunch
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-08-18
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Germany's Heating Manufacturer Stiebel Eltron Faces
Meta Description: Stiebel Eltron is working 24/7 to meet Germany's demand for energy-efficient heat pumps amidst supply chain issues and soaring energy expenses.
URL: https://financedigest.com/german-heat-pump-bonanza-test-industrys-resilience-in-russian-gas-crunchhtml

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By Thomas Escritt

HOLZMINDEN, Germany (Reuters) – In a way, Stiebel Eltron has never had it so good. The heating manufacturer’s main factory has gone up to working 24 hours a day making the energy-efficient heat pumps that Germany needs to wean itself off Russian gas.

But it also has never had it so tough, with supply bottlenecks, labour shortages, and [surging 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") making it all but impossible to meet nearly limitless demand.

I’ve worked here for 25 years and I’ve never experienced such wildly fluctuating and high material prices,” said Kai Schiefelbein, the company’s [chief operating officer](https://www.financedigest.com/iris-software-group-names-matt-tuson-as-chief-revenue-officer.html "IRIS Software Group names Matt Tuson as Chief Revenue Officer").

Thousands of medium-sized, family-owned companies like Stiebel Eltron, with some 4,000 employees and less than a [billion euros](https://www.financedigest.com/telecoms-group-orange-signs-sustainability-linked-refinancing-of-6-billion-euros-syndicated-credit-facility.html "Telecoms group Orange signs sustainability-linked refinancing of 6 billion euros syndicated credit facility") in turnover, are the engine room of Germany’s economy, accounting for half its output and some 40 million jobs. Their ability to [adapt will be the key test of whether Germany’s](https://www.financedigest.com/scholz-if-germany-continues-to-adapt-we-will-make-it-through-winter.html "Scholz: if Germany continues to adapt, we will make it through winter") prosperity, built on its manufacturing excellence and exports, can survive into the new era ushered in by Moscow’s invasion of Ukraine.

Germany built up a [business model that relied on cheap Russian](https://www.financedigest.com/pizza-firm-dp-eurasia-delivers-profit-rise-evaluating-russian-business.html "Pizza firm DP Eurasia delivers profit rise, evaluating Russian business") gas,” said Economy Minister Robert Habeck earlier this week. This [model has failed and it’s not coming](https://www.financedigest.com/like-father-like-son-when-it-comes-to-money-men-more-likely-than-women-to-see-parents-as-a-good-role-model.html "Like father like son? When it comes to money, men more likely than women to see parents as a good role model") back.

[Heat pumps](https://www.financedigest.com/cutting-business-costs-pros-of-using-commercial-heat-pumps-in-2016.html "Cutting business costs: Pros of using commercial heat pumps in 2016"), reverse refrigerators that suck heat out of the environment to warm houses and water through the winter using just a quarter of the energy of a gas boiler, are in heavy demand as Germany prepares for a winter with less Russian gas.

But Stiebel Eltron, like many other “Mittelstand” medium-sized family owned companies, has now found itself short of everything that made up Germany’s winning formula – smoothly functioning [global supply](https://www.financedigest.com/oil-prices-steady-on-uncertain-global-outlook-and-supply-concerns.html "Oil prices steady on uncertain global outlook and supply concerns") chains, skilled labour and cheap energy.

Supply chains, already stretched by the coronavirus pandemic, have been further frayed by the war in Ukraine, while the [cost of raw materials has soared](https://www.financedigest.com/amazon-other-retailers-revamp-free-shipping-as-costs-soar.html "Amazon, other retailers revamp ‘free’ shipping as costs soar"), including that of the copper from which coolant pipes are made, or the silver with which sections are welded together.

We’ve bought processors that normally cost 42 cents for 45 euros,” said Schiefelbein, pointing to a tiny component on a half-assembled unit at the company’s main factory in Holzminden, a [picturesque town](https://www.financedigest.com/escape-the-city-for-picturesque-market-town.html "Escape The City For Picturesque Market Town") by the Weser river in central Germany.

The [surge in demand](https://www.financedigest.com/adoption-of-autonomous-underwater-vehicles-market-to-surge-during-the-forecast-period-owing-to-increased-consumer-demand.html "Adoption of Autonomous Underwater Vehicles Market to Surge During the Forecast Period Owing to Increased Consumer Demand") is a bonanza for the company, founded in 1924. It sold 50,000 heat pumps last year – a third of the 154,000 sold in [Germany – and expects to sell](https://www.financedigest.com/kuehne-raises-lufthansa-stake-to-17-5-as-germany-sells-remaining-shares.html "Kuehne raises Lufthansa stake to 17.5% as Germany sells remaining shares") 80,000 this year. Revenues are expected to hit a billion euros, up from 837 [million 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") last year. But it could have sold 50,000 more if it could keep up with the demand.

‘THAT’S THE JOB’

With solid demand growth, Stiebel Eltron has it easier than many: in the autos sector, life is harder, with many suppliers finding their heavy engineering expertise is less valuable in an age of [electric vehicles](https://www.financedigest.com/tax-credits-for-eu-electric-vehicles-to-dominate-mondays-trade-talks-with-u-s.html "Tax credits for EU electric vehicles to dominate Monday’s trade talks with U.S").

Earlier this year, auto [components supplier Robert Hofmann announced it was cutting up to 70 jobs because of demand shifting away from combustion](https://www.financedigest.com/how-a-cheap-component-could-help-kill-off-combustion-cars.html "How a cheap component could help kill off combustion cars") engine vehicles. [Managing Director](https://www.financedigest.com/anya-libova-joins-apester-as-uk-managing-director.html "Anya Libova joins Apester as UK Managing Director") Oliver Hofmann told broadcaster BR that the company, a 3D printing pioneer, was seeking new markets in aviation and healthcare.

Many companies are weathering the storm, but the overall picture is grim: an Ifo institute survey of the mood in the Mittelstand showed it hitting its lowest in two years in July, with [soaring energy costs a major](https://www.financedigest.com/britain-delays-major-rail-project-hs2-as-costs-soar-again.html "Britain delays major rail project HS2 as costs soar again") concern.

The Nord Stream pipeline from Russia is delivering just 20% of its normal volumes, and many fear Moscow could yet screw the taps completely shut, bringing rationing and further misery to an [economy on the brink of recession](https://www.financedigest.com/german-economy-expected-to-skirt-recession-economy-ministry-report.html "German economy expected to skirt recession – economy ministry report").

Schiefelbein has little [time for those who predict a gloomy future for Europe’s manufacturing](https://www.financedigest.com/why-manufacturers-mustnt-lose-their-green-focus-in-troubled-times.html "WHY MANUFACTURERS MUSTN’T LOSE THEIR GREEN FOCUS IN TROUBLED TIMES") powerhouse, saying the time he spent running a Stiebel Eltron factory in China has given him a “half-Asian” can-do attitude.

“These are simply the conditions we face,” he said. And our job, my job especially, is to make [sure people keep their jobs](https://www.financedigest.com/how-to-make-sure-not-overlooked-for-the-top-jobs.html "How to make sure you’re not overlooked for the top jobs") and that the company keeps growing.

That involves recruiting from abroad where there are [staff shortages](https://www.financedigest.com/budget-cuts-staff-shortages-and-cyber-threats-keep-it-leads-awake-at-night-as-gdpr-looms.html "Budget Cuts, Staff Shortages and Cyber Threats Keep IT Leads Awake at Night as GDPR Looms"). Since 2015, the share of people with immigrant background at the company has tripled, according to Rebecca Knauer, the company’s human resources director.

With time, the company will add new production lines, allowing stretched [staff to return to working days](https://www.financedigest.com/amazon-to-lay-off-staff-in-u-s-canada-and-costa-rica-by-end-of-day.html "Amazon to lay off staff in U.S., Canada and Costa Rica by end of day") only, said Schiefelbein said as he greeted staff streaming out at the end of the dawn shift.

Most recently, they have recruited Ukrainian refugees, partly through personal networks, with staff who had chosen to host new arrivals recommending them to the company, which sought volunteers among the [company’s 2,500 staff in Germany to translate for those whose German](https://www.financedigest.com/around-40-of-german-companies-expect-output-decline-in-2023-iw-institute.html "Around 40% of German companies expect output decline in 2023 – IW institute") is not yet up to it.

The number of Ukrainians [working in Germany is still relatively low:](https://www.financedigest.com/low-use-of-shortened-work-hours-points-to-mild-german-recession-ifo.html "Low use of shortened work hours points to mild German recession – Ifo") of a million Ukrainians, 84,000 were employed in June, according to the German labour agency. Earlier refugee waves, though, such as the 2015 influx from Syria, eventually led to [strong employment growth](https://www.financedigest.com/swedish-match-continues-to-see-strong-smoke-free-sales-growth.html "Swedish Match continues to see strong smoke-free sales growth"), with some 400,000 refugees in work by 2019.

Alyona, whose family remains in the Russian-occupied Zaporizhzhia region of [eastern Ukraine](https://www.financedigest.com/eastern-ukraine-town-empties-as-residents-fear-new-russian-assault.html "Eastern Ukraine town empties as residents fear new Russian assault"), and declined to give her full name to protect them, found her experience as a seamstress had prepared her well for precision welding in central Germany.

Like many of Germany’s Mittelstand businesses, Stiebel Eltron welcomes recent government moves to make it easier for [foreigners to come to Germany](https://www.financedigest.com/first-foreign-covid-vaccines-head-to-china-from-germany.html "First foreign COVID vaccines head to China from Germany") to work, but despairs at authorities’ continuing insistence on checking whether foreign education certificates match up with Germany’s intricate vocational qualifications.

The company is spending 1.4 million euros to link itself up to existing liquid [natural gas distribution](https://www.financedigest.com/best-paying-jobs-in-natural-gas-distribution.html "Best paying jobs in natural gas distribution") pipelines to ensure gas will continue to arrive even if Russia completely closes the tap, but it is also investing in new robots that weld using electric induction rather than gas.

(Reporting by Thomas Escritt; Editing by Tomasz Janowski)


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