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21.12.2022

EURATEX addressing EU Energy Council: Cap at 180 €/MWh still too high

On Monday, December 19 2022, the European energy ministers reached an agreement on a price cap for natural gas wholesale prices.

Despite welcoming the adoption of the instrument and the prospect to limit gas price speculations on the stock market, EURATEX considers the cap at 180 €/MWh to be still too high. Also, the complexity of the conditionalities triggering the cap may weaken its effectiveness and implementation: according to the legal proposal, the price level must be reached for three working days and European wholesale gas prices must remain, for the same length of time, at €35 above the global price of liquefied natural gas. Therefore, EURATEX urges the Council of the EU to improve this market correction mechanism.

On Monday, December 19 2022, the European energy ministers reached an agreement on a price cap for natural gas wholesale prices.

Despite welcoming the adoption of the instrument and the prospect to limit gas price speculations on the stock market, EURATEX considers the cap at 180 €/MWh to be still too high. Also, the complexity of the conditionalities triggering the cap may weaken its effectiveness and implementation: according to the legal proposal, the price level must be reached for three working days and European wholesale gas prices must remain, for the same length of time, at €35 above the global price of liquefied natural gas. Therefore, EURATEX urges the Council of the EU to improve this market correction mechanism.

Furthermore, EURATEX insists on the need to provide the industry with support measures to counteract competition from the US and other countries. Dirk Vantyghem, Director General of EURATEX, affirms: “The Industry is at the heart of the European way of life and the fundament of our social market economy. The European textile industry is 99.8% composed of SMEs, which struggle with tight margins while being at the upstream part of the supply chain: the EU must do more to save its industrial structure, its competitiveness and its capacity to provide essential products to European citizens”.

Source:

Euratex

Graphic Euratex
16.12.2022

European textiles industry extremely concerned about the fast loss of competitiveness

  • Potential loss of competitiveness, caused by the EU’s inaction of the energy crisis, and Chinese and US subsidies to domestic industry

Following yesterday’s European Council summit and its conclusions on the measures to tackle the energy crisis, the European textiles industry is extremely concerned about the fast loss of competitiveness of Europe and demands urgent action to save the industry.

The chain of factors determining this sharp decline in competitiveness is twofold. First, the energy cost in Europe is more than 6 times higher than in the US, China, and neighbouring countries. This factor alone has almost erased the business case for producing in the EU. At present, many textiles and clothing companies are producing at net loss or have shut down production. The industrial conditions have worsened in such a way that there is no business case to invest in Europe or buy products produced or processed in the EU. It is only the sense of responsibility of the entrepreneurs towards the European society that is keeping the plants and production running.

  • Potential loss of competitiveness, caused by the EU’s inaction of the energy crisis, and Chinese and US subsidies to domestic industry

Following yesterday’s European Council summit and its conclusions on the measures to tackle the energy crisis, the European textiles industry is extremely concerned about the fast loss of competitiveness of Europe and demands urgent action to save the industry.

The chain of factors determining this sharp decline in competitiveness is twofold. First, the energy cost in Europe is more than 6 times higher than in the US, China, and neighbouring countries. This factor alone has almost erased the business case for producing in the EU. At present, many textiles and clothing companies are producing at net loss or have shut down production. The industrial conditions have worsened in such a way that there is no business case to invest in Europe or buy products produced or processed in the EU. It is only the sense of responsibility of the entrepreneurs towards the European society that is keeping the plants and production running.

Secondly, while the EU is passive and extremely slow in articulating a credible and effective response to the energy crisis, the main international competitors and trade partners (China, India and the US respectively) have developed comprehensive state-aid frameworks for their domestic industry despite not being affected by this crisis at all. The latest example is the 369-billion-dollar scheme of the Inflation Reduction Act rolled out by the Biden administration.

Recent trade data  already indicate a loss of global competitiveness: imports to the EU have grown tremendously in 2022 (+35% year-to-date). It is also evident that the surge in imports goes in parallel with the surge of natural gas price. It is expected that energy prices will remain high and volatile, opening the door for imports to gain substantial market shares in the EU.

The chart indicates the development of the Title Transfer Facility (TTF) until September 2022 since Eurostat data for Q4 2022 has not been published yet. Euratex is aware that the market situation has eased somewhat since in the past months, but the crisis remains because gas prices are still extremely high in comparison to last year. This suggests that the current loss of competitiveness of the EU manufacturing will not be recovered even with lower energy prices, unless measures are taken to correct the unlevel playing field on which the EU industry has to operate in the international markets. Only with an ambitious and comprehensive relaunch plan at EU level, Europe will be able to restore its credibility as a global manufacturing powerhouse and investments.

If the status quo is maintained, not only the EU will not be able to recover its competitive position on the global business stage, but it will also fail its plans to reach zero-net emissions and achieve circularity. It is evident that these ambitions - that the industry is passionately supporting - need massive capital investments. However, in the current scenario an investments diversion can only be expected to markets where governments are actively supporting those investments and energy costs are much lower – regardless of their fossil- or non-fossil origin.

The European textiles industry – the whole value chain, from fibres, nonwoven, to fabrics, clothing manufacturers - are facing unprecedented pressure deriving from the current geopolitical situation, the new macroeconomic conditions and unfair competition from third states. The situation is going to worsen if no emergency action is taken, especially because a recession is expected in the coming months.

The main structural component of the EU manufacturing are SMEs: these are economic actors that are particularly exposed to the current crisis as they do not have the financial leverage to absorb the impact of energy prices for much longer. Urgent EU action is needed to ensure their survival.

EURATEX calls on the EU political leaders in the Commission, in the European Council and in the national capitals to:

  1. Raise the ambition and adopt a comprehensive approach at EU level: energy, state-aid and trade policy must be brought together in a single strategy with concrete emergency solutions and with a clear SME dimension;
     
  2. Let all hesitations aside and adopt a meaningful price cap on natural gas wholesales, that should be ideally no higher than 80 euro/MWh. In parallel, it should also be ensured that electricity prices are brought to a sustainable price level;
     
  3. Change the European posture on state-aid, even temporarily. An ambitious plan of investments and state-aid in green technologies to support the industrial transition should be rolled out.

Such a plan, however, should not be conceived as a retaliation against our most necessary and like-minded trade partners. Access to finance and markets must be safeguarded for all those actors who are capable and willing to invest in Europe, on the basis of reciprocity. In   these challenging times for geopolitical stability, ensuring strong trade ties with our traditional allies and partners is of utmost importance. The roll-out of an investment and state aid plan should not interfere, but rather support, the dialogue with the US (and other partners) and the deepening of our trade and investment partnership. Such a dialogue should be accelerated in the context of the TTC as well as at WTO level.

Source:

Euratex

04.10.2022

EURATEX response to the latest EU Energy Council decision

  • More ambition and joint European efforts needed

On Friday 30 September, the EU Energy ministers approved a Council Regulation proposal to address high energy prices. The Regulation focusses on the electricity prices and electricity demand reduction, on a solidarity levy from the fossil fuel sector and a retail levy for SMEs. While these initiatives are driven by goodwill, they miss the point of bringing gas prices down – the one measure that would bring the biggest impact on European industry.

EURATEX – as the voice of the European apparel and textiles manufacturers – regrets this lack of ambition: the Regulation does not foresee any meaningful action to directly support the European industry. This can accelerate the de-industrialisation of Europe and loss of industrial capacity to secure the European standard of living and implementing the Green Deal.

  • More ambition and joint European efforts needed

On Friday 30 September, the EU Energy ministers approved a Council Regulation proposal to address high energy prices. The Regulation focusses on the electricity prices and electricity demand reduction, on a solidarity levy from the fossil fuel sector and a retail levy for SMEs. While these initiatives are driven by goodwill, they miss the point of bringing gas prices down – the one measure that would bring the biggest impact on European industry.

EURATEX – as the voice of the European apparel and textiles manufacturers – regrets this lack of ambition: the Regulation does not foresee any meaningful action to directly support the European industry. This can accelerate the de-industrialisation of Europe and loss of industrial capacity to secure the European standard of living and implementing the Green Deal.

“We call on the EU and Member States to pursue our common European interests. The hesitation to adopt a European price cap on natural gas, accompanied by massive national spending programs to subsidise domestic gas consumption, is a dereliction of duty”, said Director General Dirk Vantyghem.

Triggering competition among Member States rather than promoting cooperation in bringing gas prices down for all European companies will also prove ineffective: indeed, the industrial structure in the European Union is fully integrated. Once a segment of the value chain perishes because of the crisis in one country, all companies based in the EU will suffer its negative effect, driving prices up in the supply chain and adding further strain to our operations. The European industry will be saved as a unified industry, or it will not be saved at all. Fragmenting the internal market will not protect any Member State’s domestic manufacturing.

In addition to a EU-wide price cap on gas, EURATEX calls on the European Commission to swiftly amend the Temporary Crisis Framework, making sure the criteria and thresholds applied do not exclude vulnerable companies from possible support (e.g. in textile finishing and services). Euratex also encourages the European Commission to revise the ETS Indirect Carbon Leakage mechanism and include the man-made fibres, non-wovens, spinning and weaving sectors.

It is high time now for the European Union, said the association – in particular for Member States and the Commission – to step up their ambition and adopt a European vision: a chaotic and fragmented approach will not mitigate the crisis but accelerate it.

Source:

Euratex

Photo Pixabay
16.09.2022

Euratex, EuroCoton, Edana, CIRFS and ETSA join forces for the European Textile Industry

The associations published a joint European textiles industry statement on the energy package claiming incisive actions with no further delay.
Here is the statement in full:

Last month, when gas wholesale prices reached the record level of 340€/MWh – triggering also sky-high electricity prices – the European textiles industry called on the European Union to adopt a wholesale price cap for gas, the revision of the merit-order principle in the electricity market, support for SMEs and a single European strategy. On 14 September 2022, on the occasion of the State of the Union address by President Von der Leyen, the Commission announced initiatives aimed at tackling the dramatic energy crisis that the Europe is facing.

We, the European associations representing the whole textiles’ ecosystem,  welcome these proposals by the Commission to change the TTF benchmark parameters and decouple the TTF from the electricity market and the revision of the merit-order principle for the electricity market, which is no longer serving the purpose it was designed for.

The associations published a joint European textiles industry statement on the energy package claiming incisive actions with no further delay.
Here is the statement in full:

Last month, when gas wholesale prices reached the record level of 340€/MWh – triggering also sky-high electricity prices – the European textiles industry called on the European Union to adopt a wholesale price cap for gas, the revision of the merit-order principle in the electricity market, support for SMEs and a single European strategy. On 14 September 2022, on the occasion of the State of the Union address by President Von der Leyen, the Commission announced initiatives aimed at tackling the dramatic energy crisis that the Europe is facing.

We, the European associations representing the whole textiles’ ecosystem,  welcome these proposals by the Commission to change the TTF benchmark parameters and decouple the TTF from the electricity market and the revision of the merit-order principle for the electricity market, which is no longer serving the purpose it was designed for.

We also welcome the proposal to amend the state-aid framework that, in our view, should include the textiles finishing, the textiles services and the nonwoven sectors as well as a simplification of the application requirements. Furthermore, we call for a uniform implementation across the EU.

However, we acknowledge that the Commission proposal lacks in ambition and – if confirmed – it will come at the cost of losing European industrial capacity and European jobs. Ultimately, Europe will remain without its integrated textiles ecosystem, as we know it today, and no mean to translate into reality the EU textiles strategy, for more sustainable and circular textiles products.

An ambitious and meaningful European price cap on the wholesale price of natural gas is absolutely necessary. Europe is running out of time to save its own industry. It is now time to act swiftly, decisively in unity and solidarity at European level. We understand a very high price cap has been so far discussed among Ministries and that is not reassuring for companies across Europe: if any cap is, as expected, above 100/MWh, these businesses will collapse.

Already in March 2022, with EU gas wholesale prices at 200€/MWh, the business case for keeping textiles production was no longer there. To date, natural gas wholesale prices have reached the level of 340€/MWh, more than 15 times higher compared to 2021! Currently, many businesses have suspended their production processes to avoid the loss of tens of thousands of euros every day. We hope this will not become the new normal and – to reduce the likelihood of such a scenario – we call on the Commission, the EU Council and the Parliament to swiftly adopt decisive, impactful and concrete actions to tackle the energy crisis and ensure the survival of the European industry.

Given the dire international competition in which the EU textiles industry operates, it is not possible to just pass on the increased costs to consumers. Yet, with these sky-high prices, our companies cannot afford to absorb those costs. The EU textiles companies are mainly SMEs that do not have the financial structure to absorb such a shock.  In contrast with such reality in Europe, the wholesale price of gas in the US and China is 10€/MWh, whereas in Turkey the price is 25€/MWh. If the EU does not act, our international competitors will easily replace us in the market, resulting in the de-industrialisation of Europe and a worsened reliance on foreign imports of essential products.

Specific segments of the textile industry are particularly vulnerable:

  • The man-made fibres (MMF) industry for instance is an energy intensive sector and a major consumer of natural gas and electricity in the manufacturing of its fibres. Not only is it being affected by higher energy process, it is also experiencing shortages and sharply rising costs of its raw materials.
  • For the nonwovens segment, production processes – which use both fibres and filaments extruded in situ – are also highly dependent on gas and electricity. Polymers melting and extrusion, fibres carding, web-forming, web-bonding and drying are energy-intensive techniques. Nonwoven materials can be found in many applications crucial to citizens like in healthcare (face masks) or automotive (batteries).
  • It also is to be noted that for some segments the use of gas has no technological substitute: for example, the dyeing and finishing production units make very intense use of gas. These production units are mainly composed by boilers and driers, which only work on gas and there is no alternative technology.
  • The textile services sector is also struggling: with the critical nature of the service they provide, they require a considerable amount of energy to keep services, particularly hospitals and care homes stocked with lifesaving material as well as clothing and bed linens for the patients themselves. Losing these businesses would cause a lack of clothing for healthcare professionals, including protective sanitary gowns for surgeons, nurses and doctors, uniforms including other forms of personal protective equipment.
Source:

Euratex

26.08.2022

EURATEX: Future of the European textile & clothing industry is at stake

  • European Textile Industry calls for immediate action to tackle the energy crisis;

The European textile & fashion in Europe, represented by EURATEX, calls for a single European strategy to tackle this energy crisis. To safeguard the future of the industry, a revision of the electricity price mechanism is necessary and an EU wide cap on gas prices at 80€/MWh. Special company support needs to be granted to avoid bankruptcy and relocation of textile production outside Europe.

Gas and electricity prices have reached unprecedented levels in Europe. Due to severe global competition in the market that characterizes the European textile & clothing industry, these cost increases are impossible to pass on to customers. This has already led to capacity reductions and production stops. Closures and the shift of production outside Europe are being forecasted should the current situation persist, leading to further de-industrialization of our continent and increased dependency on external suppliers.

  • European Textile Industry calls for immediate action to tackle the energy crisis;

The European textile & fashion in Europe, represented by EURATEX, calls for a single European strategy to tackle this energy crisis. To safeguard the future of the industry, a revision of the electricity price mechanism is necessary and an EU wide cap on gas prices at 80€/MWh. Special company support needs to be granted to avoid bankruptcy and relocation of textile production outside Europe.

Gas and electricity prices have reached unprecedented levels in Europe. Due to severe global competition in the market that characterizes the European textile & clothing industry, these cost increases are impossible to pass on to customers. This has already led to capacity reductions and production stops. Closures and the shift of production outside Europe are being forecasted should the current situation persist, leading to further de-industrialization of our continent and increased dependency on external suppliers.

Specific segments of the textile industry are particularly vulnerable. The man-made fibres (MMF), synthetic and cellulose-based fibres, industry for instance is an energy intensive sector and a major consumer of natural gas in the manufacturing of its fibres. The disappearance of European fibre products would have immediate consequences for the textile industry and for society at large. The activities of textile dyeing and finishing are also relatively intensive in energy. These activities are essential in the textile value chain in order to give the textile products and garments added value through colour and special functionalities (e.g. for medical applications).

The European textile industry calls for an EU-wide cap on gas prices at €80/Mwh, and a revision of the price mechanism for the electricity market, to reduce the huge price gaps with our foreign competitors.

Governments should ensure that critical industries, such textiles and all its segments, are able to ensure gas and electricity contracts towards the end of the year at an affordable price. Stable and predictable energy supply is of the utmost importance. Gas restrictions and rationing must only be used as a last resort. No mandatory consumption cuts should be foreseen.

In addition to these measures under discussion, currently a proliferation of contradictory, uncoordinated national initiatives to tackle the energy crisis is observed. This has led to a de facto fragmentation of the Single Market, resulting in a chaotic policy and regulatory environment that adds a further strain on our supply chain, which is fully integrated at European level. Measures that guarantee a level playing field in the EU are utmost important.

EURATEX President Alberto Paccanelli explained: “Given the current situation, a scenario where entire segments of the textiles industry will disappear can no longer be excluded. This would lead to the loss of thousands of companies and tens of thousands of European jobs and would further aggravate the dependency of Europe to foreign sources of essential goods. This applies specifically to SMEs who need temporary support measures (e.g. state aids, tax relieves, energy price cap) to survive the current crisis and to prepare for the green transition in the longer run.”

More information:
Euratex energy supplies crisis
Source:

Euratex

Bohrgerät Schiefergas Bohrhaken Photo: Pixabay
26.04.2022

Natural gas embargo against Russian Federation would mean the end for man-made fibre producers

With its current position paper, the Industrievereinigung Chemiefaser e.V. takes a stand on the intense discussions about an embargo against Russian natural gas supplies. The association believes that Germany's economic and global political future can only be secured with a strong industrial base and therefore, weighing up all positions and influencing factors and assessing the consequences for labour and the market economy, cannot support a short-term natural gas embargo on Russia.

An interruption of the continuous supply of natural gas would result in immense losses for the chemical fibre companies, which could even lead to the destruction of the industry in Germany. The losses are made up of technical damage caused by an uncoordinated shutdown of plants on the one hand and market-related consequential damage caused by lost production and a lack of product sales on the other.

With its current position paper, the Industrievereinigung Chemiefaser e.V. takes a stand on the intense discussions about an embargo against Russian natural gas supplies. The association believes that Germany's economic and global political future can only be secured with a strong industrial base and therefore, weighing up all positions and influencing factors and assessing the consequences for labour and the market economy, cannot support a short-term natural gas embargo on Russia.

An interruption of the continuous supply of natural gas would result in immense losses for the chemical fibre companies, which could even lead to the destruction of the industry in Germany. The losses are made up of technical damage caused by an uncoordinated shutdown of plants on the one hand and market-related consequential damage caused by lost production and a lack of product sales on the other.

Depending on the location and size of the plants, a short-term outage due to a lack of natural gas would result in average losses of EUR 5 million/plant. In addition, an ongoing daily loss would have to be expected which could be in the order of e.g. 250 000 EUR/day/plant, depending on the location. Furthermore, restarting the plants is questionable if supply chains could no longer be serviced and customers globally look for other suppliers in the meantime. Thus, entire sites would be at risk. With China's global market share in man-made fiber production already exceeding 70 %, a scenario is more than realistic that China will also take over these supply chains, thus leading to an even greater dependence on China.

The vast majority of power plants used for the production of man-made fibers, especially the highly efficient combined gas-and-steam power plants based on the principle of cogeneration with efficiencies of 90 %, are designed exclusively for the use of natural gas. Quite often, there are no technical facilities for operating gas turbines or steam boilers with fuels other than natural gas. Only in exceptional cases could a switch be made to mineral oil. However, even in these cases, the necessary stockpiling of mineral oil is designed only for a short-term failure of the gas burners. A change to base-load supply with mineral oil could take a time window of between 3 and 56 months, depending on the type of plant and taking into account licensing requirements. The use of hydrogen as an energy source is only possible in the very long term. In the few cases where natural gas can be substituted, investment costs of EUR 250 million/plant can be incurred, depending on the emission level of the converted plant.

A natural gas embargo imposed by the European Union on the Russian Federation would not only mean the cessation of production and the end for man-made fiber producers, but also for other industries such as basic chemicals, paper, metal production and glass and ceramics manufacturing, as well as their related sectors. As the German economic institute Institut der Deutschen Wirtschaft Köln e. V. (IW Köln) concluded in its summary report 40/2022 of April 2022: "No one can accurately predict what future these businesses would then still have in Germany. That would be an unprecedented development."

Source:

Industrievereinigung Chemiefaser e.V.