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SOLTAU, Germany, August 9 (Portal) – Roaring over the clatter of machinery, Gerd Roeders reluctantly prepares to temporarily close his German aluminum foundry to survive Europe’s growing gas shortages.
Roeders hopes that by switching the 200-year-old plant to three weeks of 24-hour shifts followed by a week-long shutdown, he can maintain performance while reducing his gas usage.
His bill has already more than doubled this year from a year earlier, he said, and feared it will triple or even quadruple in 2023.
The plan will save on the cost of the gas needed to fire up the stoves each morning, Roeders calculates, even if it means employees at family-owned GA Roeders have to pay more for night shifts.
Survival for GA Roeders GmbH and the 600 other foundries in Germany, most of which are small and medium-sized companies with fewer than 250 employees, means cutting costs and tough talks with customers.
“We open our prices to customers and tell them they have to pay more,” Roeders, 59, told Portal as workers prepared the plant for the first week of rest. “We cannot deliver parts if we invest and get nothing in return.”
GA Roeders produces more than 1,000 parts in factories in Germany and the Czech Republic with around 500 employees. It serves automobile manufacturers such as Volkswagen (VOWG_p.DE) and Continental (CONG.DE), aircraft manufacturers and medical technology companies and generates an annual turnover of 60 million euros.
While foundry contracts generally include a clause allowing them to charge more if metal costs rise, there is no such clause for energy.
Roeders said he’s always tried to be economical with energy — the company’s second-biggest expense item after staff — a habit he learned from his father, who turned off office computers at night and turned off the lights at lunchtime.
But the company now faces unprecedented increases.
The price of the Dutch front-month TTF gas contract, the benchmark for Europe, has nearly tripled since the beginning of the year on slowing Russian gas supplies from Nord Stream 1 and a tight global market. Continue reading
And although the company still has a 30,000-liter oil tank on site that hasn’t been used in years, it would feel like a step backwards to use it again, Roeders said.
Germany’s energy regulator is urging businesses, governments and consumers to reduce their gas use, and has urged the largest companies to come up with contingency plans to further reduce winter consumption.
Still, CEOs of German automakers including Mercedes-Benz (MBGn.DE) and Volkswagen (VOWG_p.DE) have warned in recent weeks that maintaining production levels amid contingency plans will only work if their suppliers can continue to supply parts .
Manufacturers of aluminium, steel and glass, which are essential to making cars, rely on natural gas even more than the automakers themselves, raising fears of a knock-on effect on their global customer base if they are forced to shut down production.
German auto component manufacturers sell to more than 3,000 direct customers in the United States, Europe and Japan, with their products reaching over 100,000 second-tier customers, supply chain analysis firm Interos estimates.
The energy crisis is the latest in a series of upheavals, from carbon caps and supply chain bottlenecks to tougher due diligence laws that small businesses say are struggling to overcome without further support.
“The conversion to electricity-powered units is in need of renovation and is at best conceivable in the medium term,” said a spokesman for the Association of German Foundries.
“There is currently no technology available other than gas firing machines,” the spokesman added.
Along with an alliance of other aluminum producers and a university, GA Roeders has received government funding to develop a prototype furnace that could run on a mixture of 30% to 40% hydrogen and 60% to 70% gas.
The aim is to eventually drive exclusively with hydrogen.
Interest in the project has multiplied since Russia’s invasion of Ukraine, Roeders said, but there are still many hurdles before it can become operational – from scaling the technology to building a hydrogen charging network.
“It usually takes at least five years to industrialize something like that,” he said. “We have to dress warmly, we won’t have a hydrogen furnace yet.”
($1 = 0.9794 euros)
(Corrected story to remove incorrect reference in paragraph 2 to €12.3 million gas bill.)
Reporting by Victoria Waldersee, Martin Schlicht, Fabian Bimmer and Fanny Brodersen
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