Bridgnorth Aluminium has weathered Brexit, Covid, and repeated energy shocks in recent years. But this winter brings extra “stress and pressure,” says its head of sales, Adrian Musgrave.
Musgrave’s company makes rolled aluminium, used in packaging, construction, and the manufacture of items such as cars and batteries. Like many struggling industrial businesses across Europe, Bridgnorth Aluminium faces the looming threat of soaring energy bills, which Musgrave describes as “just worry upon worry.”
The cost of natural gas has doubled in the past two months, driven by renewed fighting between the US and Iran, reaching a three-year high in the UK and the EU this week. More price rises are likely in the colder months.
Bridgnorth Aluminium, which employs 370 people at its plant in Shropshire in the UK’s industrial heartland, is already feeling the effects. Its combined gas and electricity bill is about £1.1m per month, 18% of its total costs, and rising.
Its biggest contracts include a safety net – once gas prices cross a certain point, customers pay the difference. That threshold was crossed last month – but whether clients will come back concerns Musgrave. “They have to pay because it’s in the contract, but they will obviously not like it,” he says. “When it comes up for renewal it will become an issue.”
Musgrave says the company is not in a position where it would need to make layoffs or temporary shutdowns this winter. Others may not be so lucky – one forecast, by the Item Club, predicted earlier this year that Britain will lose 163,000 jobs in 2026 because of the war, concentrated in manufacturing-heavy regions such as south Wales and the Humber region.
Bridgnorth Aluminium is considering taking a longer Christmas break, or doing planned maintenance – originally scheduled for April – earlier than expected in January, so the factory runs less during times of high prices. “And then the employees are obviously aware,” he says, “so then people begin to worry.”
View image in fullscreenStorage tanks at the Grain liquefied natural gas (LNG) terminal near Rochester, UK. Photograph: Bloomberg/Getty Images
Gas spikes and shortages
The conflict has disrupted global energy supplies since Iran started attacking ships in the Gulf and choked off access through the strait of Hormuz, the narrow waterway through which a fifth of the world’s oil and gas passes.
British wholesale gas prices climbed to 205p per therm this week, the highest point since Russia’s invasion of Ukraine in 2022 and up 101% from 102p in June. That is compared with 78p per therm at the end of February. The UK imports about 70% of its gas, leaving it especially vulnerable to price swings.
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A shortage of stored gas reserves compounds the issue. Europe is heading into winter with gas stores at their lowest level in over a decade, after the Hormuz disruption stopped countries topping up their reserves through the summer, when prices are normally lower. Storage is now about 67% full, against a seasonal average closer to 80%.
Germany, which holds the largest storage capacity in Europe, is only about half full, and is on course to miss its official 70% storage target this year. The Netherlands is expected to miss its 80% target too.
As one of Europe’s biggest gas consumers, the UK may be especially exposed, with some of the lowest levels of domestic storage capacity and relying instead on pipeline imports from Europe and tankers from the US and Middle East. Chris O’Shea, the chief executive of British Gas owner Centrica, said last month that Britain had “almost no gas in storage” for the coming winter.
View image in fullscreenA crane operator moves coils of steel at a steel plant in Duisburg, Germany. Photograph: Sean Gallup/Getty Images
Strife in the Mittelstand
Alexander Julius, managing partner of Macrometal Handelsgesellschaft, a steel distributor in Hamburg, says it is competing “against producers in regions where energy costs arFor industries like his—part of Germany’s Mittelstand of medium-sized companies—energy is not just another cost, he says, but “a fundamental production input.” Yet instead of receiving support, they are being “hammered by green taxes while energy prices rocket.”
Julius, who is also president of the trade body Eurometal, says companies will go bankrupt and work will move to China or India unless something is done to reduce energy costs. Eurometal has warned that manufacturing job losses across Europe could reach 300,000 by the end of the year, driven partly by Chinese competition and made worse by energy costs.
Axel Eggert, director general of the European steel body Eurofer, adds that high prices “will inevitably lead to production disruptions. Such additional costs cannot simply be absorbed by energy-intensive industries exposed to international competition.
“The longer the crisis lasts, the greater the risk that temporary production cuts become permanent, with consequences for investment, employment and, ultimately, the survival of industrial plants in Europe.”
Germany’s car industry has also called for urgent action from Berlin and Brussels, saying “high energy prices are among the biggest competitive disadvantages of Germany as a business location,” with electricity prices in some cases three times higher than in the US.
“Germany, just like the EU, urgently needs a jointly supported energy strategy with low electricity prices and future-proof grid infrastructure,” said a spokesperson for the trade association VDA. Building new industries will become “a decisive factor in determining” inward foreign investment in future, they added.
‘It just keeps coming’
The problem is especially severe for the chemicals sector, where companies rely on gas both to power their plants and as feedstock—the raw material from which many products are made—meaning every price spike hits them twice.
Francesco Buzzella, president of Italy’s chemicals trade body Federchimica, says it remains the “primary factor undermining the competitiveness of chemical companies” in the country. Energy now accounts for 18% of the value of everything Italy’s chemical industry produces, up from 14% in 2021—and could reach 23% if gas and oil prices do not fall. This week oil hit $107 a barrel as the US and Iran continue to trade blows.
Production output in the UK has fallen by 60% since 2021, according to the Chemicals Industry Association, with at least 25 sites closing.
Peter Huntsman, chief executive of the chemicals group Huntsman Corporation, told the Guardian in March that continued high prices could force the closure of the company’s last remaining UK plant, at Wilton on Teesside.
Back in Shropshire, Musgrave says Bridgnorth Aluminium’s owner, the Belgian industrial group Viohalco, wants to invest further in the company’s operations, but the numbers are getting harder to justify.
“They would like to make some significant investments—the UK market for aluminium is quite big, and we would like to be able to sell more at home,” he says.
But energy and other pressures make it “a difficult picture for shareholders to get their head around… The business conditions for investment are really challenging, and changing quite rapidly.
“I’ve been in this business just over 20 years. For the first 10, the macro environment was always pretty stable. But then we had Brexit, which changed things; the energy crisis with Ukraine; Covid; and now this.
“You just think you’re going to get a year where maybe it won’t be too much change,” he adds. “But it just keeps coming.”
Frequently Asked Questions
Here is a list of FAQs about the energy crisis in Europe focusing on the supply shocks and their impact on industry
Beginner Questions
What is causing the energy crisis in Europe
It is mainly caused by a shortage of natural gas Before the war in Ukraine Europe bought a lot of cheap gas from Russia Now that supply has been cut drastically and Europe is struggling to find enough gas elsewhere to keep the lights on and factories running
Why are factories at the edge
Factories need a lot of energy to make things like steel glass and fertilizer Because gas is so expensive and hard to get many factories cannot afford to run Some are shutting down production entirely because it costs more to make the product than they can sell it for
Will this affect my electricity bill
Yes likely Because natural gas is used to generate electricity the high price of gas pushes up the price of electricity for everyone including homes and businesses
What does supply shock mean
A supply shock is when something suddenly changes the availability of a product In this case the supply of gas dropped suddenly which made the price go way up
Is Europe running out of gas completely
No they are not running out completely but they are getting very low Countries are working to buy gas from other places and are trying to use less energy to make sure they have enough for winter heating
Advanced Questions
Which industries are most vulnerable to these supply shocks
Energyintensive industries are the most vulnerable This includes
Chemical and Fertilizer Natural gas is a raw material not just fuel
Steel and Aluminum These require massive amounts of heat and electricity
Glass and Ceramics These need furnaces that run 247
What is the difference between price and supply shocks in this context
A supply shock is the physical lack of gas A price shock is the resultthe cost of the gas that is available skyrockets because everyone is competing for it Europe is facing both simultaneously
How does the energy crisis lead to inflation
Energy is a cost of doing business When energy prices go up the cost of making almost everything goes up Companies pass these higher costs to consumers which causes inflation rising
