Spain's Sidenor suspends production due to spiralling energy costs

BILBAO, Spain (Reuters) -Spanish steelmaker Sidenor said on Monday it had suspended production at its plant near the city of Bilbao until the end of the year due to a sharp increase in electricity prices which made operations financially unviable.

European energy prices have skyrocketed this year as tight gas supplies collided with a rebound in demand in the wake of the COVID-19 pandemic and increased appetite for carbon-emissions permits.

Sidenor, which produces around 1 million tonnes of long-steel products per year at plants in northern Spain, said the price it pays per megawatt-hour of electricity had risen fourfold in a year, driving up overall production costs by 25%.

“With an impact on production costs of more than 200 euros per tonne it is impossible for Sidenor to maintain its current production rate,” the company said.

It plans to gradually extend the shutdown to other plants.

“However this suspension does not solve the root of the problem and other measures will be necessary to resolve the current situation of uncontrolled electricity prices.”

Among the worst affected countries by the price surge, Spain introduced measures last month to claw back profits from utilities to reinvest in the grid, and has been petitioning Brussels for a broader response.

Last week the European Union said it would examine proposals to revamp its power market including measures to decouple the price of power from the cost of gas and to consider a joint gas-buying platform to increase member-states bargaining power.

Sidenor is among the first companies to announce stoppages but power costs have been taking a toll on manufacturers with August industrial prices hitting a 41-year high and industrial output growth undershooting expectations.

Reporting by Vincent WestWriting by Nathan Allen, editing by Inti LandauroEditing by Louise Heavens