Speira’s German aluminium smelter plans to reduce production by 50% as energy cost bites

Rising energy prices are affecting the aluminium industry more than ever. As a result, Speira, a significant European aluminium rolling firm, is thinking of reducing the production of its German aluminium smelter to 50 per cent of the total capacity. The final decision on the production cut is expected to be taken by September.

As per the reports, Speira was once a part of Norsk Hydro ASA, one of the biggest manufacturers of aluminium in the world, which was later sold to KPS Capital Partners last year. Although the German Speira facility can manufacture roughly 160,000 tonnes of aluminium annually, it now only produces about 140,000 tonnes.

Aluminium is a metal that consumes the highest amount of energy. However, the rising fuel prices have resulted in the shutting down of many aluminium smelters, which might have a long-term impact on regional supplies and increase consumer dependence on imports. In the past year, electricity prices have soared rapidly, despite long-term power supply agreements and energy hedges.

Europe's power-intensive sectors are seeing their revenues shrink due to rising energy costs, and Speira's output cutbacks will worsen the crisis's effects on the continent's metal industry. Although Europe's metal sector is one of the biggest consumers of power and gas, its ability to produce aluminium and zinc has decreased by almost 50 per cent over the previous year. The halting of operations at zinc and an aluminium smelter was notified last week by Nyrstar and Norsk Hydro, respectively.

The enterprises owned by Speira also use a lot of natural gas. These manufacturers turn commodity-grade aluminium into specialised items for the packaging, automotive, and other industries, but the German gas safety tax has significantly increased their costs.

Although the first wave of output cuts sent LME aluminium prices over the roof early this year, concern about a potentially steep decline in demand has kept prices in check. Smelters are under additional stress due to the declining cost of aluminium.