Russia’s war slows some European factories as energy costs soar

MILAN (AP) — Italian paper mills that make everything from pizza boxes to furniture wrappers have ground to a halt as Russia’s war in Ukraine sent natural gas prices skyrocketing.

And it’s not just paper. Italian steelworks also turned off electric furnaces last week. And fishermen, faced with huge oil price spikes, have stayed in port, mending nets instead of throwing them away.

Nowhere than in Italy, the European Union’s third-largest economy, dependence on Russian energy weighs more heavily on industry. About 40% of electricity is produced from natural gas, largely from Russia, compared to about a quarter in Germany, another major importer and the continent’s largest economy.

Over the past decade, Italy’s dependence on Russian natural gas has risen from 27% to 43%, a fact lamented by Prime Minister Mario Draghi. It will take at least two years to replace it, specifies its Minister of Energy Transition.

Even before the war, Europe faced a severe energy crisis that drove up the costs of electricity, food, supplies, and everything else for individuals and businesses. Ever-higher prices linked to fears that the conflict could lead to a power cut are hitting the continent much harder than the United States, because it imports much of its oil and gas from Russia.

European leaders meeting in Versailles near Paris on Friday discussed ways to ease the pain. Draghi pushed to diversify gas sources, develop renewable energy and introduce a cap on natural gas prices. He said his foreign minister, who recently visited Algeria and Qatar, was working on new gas markets.

“We’re talking about mistakes that have been made for many years,” said Francesco Zago, CEO of Venetian paper and packaging maker Pro-Gest. “We get too much gas from Russia. At school they tell us that we have to diversify the sources, otherwise there is a danger.

Natural gas prices rose last year as supplies dwindled in Europe, but Zago said his company was able to stabilize prices and keep operating. This changed with the Russian invasion, when already high prices rose from 90 euros per megawatt hour to over 300 euros per megawatt hour.

“We found ourselves facing huge losses,” Zago said.

To remain profitable, he would have had to almost double the prices from 680 euros per ton to 1,200 euros, which is not feasible on the market.

It has suspended operations at six factories that recycle paper to supply a third of all Italy’s packaging needs, and it is closely monitoring the energy market to see when production can resume. For now, there is still enough stock to keep the company’s sites open which manufacture cardboard boxes and other packaging, supplying industries from food to pharmaceuticals to furniture. But that might run out soon.

Similarly, Acciaierie Venete closed three of its steel mills for a few days last week as prices soared 10 times above normal. Makers of high-grade steel for automotive and agricultural machinery had enough inventory to work on the finished product, waiting for prices to drop so they could reopen.

“Never, ever has it happened that we had to shut down any furnaces,” said Francesco Semino, an executive at the steel company based in the northeast Veneto region.

The urgency of Italy’s energy situation is trickling down to consumers in the form of higher heating bills and, more recently, higher prices at the pump, with petrol topping €2 a liter this week , or nearly $6 per gallon.

Call shows on the radio solicit ideas on how to save energy, rekindling memories of long-discarded tricks like bed heaters fueled by embers. The Italian state broadcaster has launched a campaign with lists on how to save energy, including turning off lights, lowering thermostats and regularly defrosting fridges, under the motto ‘M’illumino di meno or “I light less”.

Truckers who say they can’t afford higher gas prices are expected to strike next week. Fishermen took the hit last week, deciding not to trawl the waters off Italy, with fishing boats along the entire peninsula moored in port.

At current prices, it costs 1,250 euros a day to get boats out of Fiumicino, leaving little room for profit after criss-crossing the sea for cod, sea bass, sea bream, octopus, squid and shrimp, said Pasquale Di Bartolomeo, who leads one of 22 boats out of port near Rome.

Restaurants, he said, will settle for frozen seafood or farmed fish. He hopes prices will drop so he can return to work.

“The family needs to eat, there are expenses,” said Di Bartolomeo.

Italy decreased its gas consumption from 2010 to 2014, thanks to the addition of subsidized wind and solar power, but dependence on natural gas has started again in recent years by taking polluting coal-fired power plants offline.

They have been replaced mostly by natural gas as renewables have stalled, in part because of Italy’s infamous bureaucracy that has kept many investors away, said Matteo Di Castelnuovo, an energy economist at the Bocconi University of Milan.

“Italy has clearly underestimated the problem of its increased gas consumption in recent years, and with that, its reliance on Russian gas,” he said.

The government has pledged to cut red tape and this week approved six new wind farms that will produce more than 400 megawatts of power. The Minister for Energy Transition, Roberto Cingolani, launched the idea of ​​next-generation nuclear power to a reluctant population.

“Nuclear fusion will not save us from Russian gas,” Di Castelnuovo said, referring to technology that is still decades away.

Italy’s dependence on Russian gas can be reduced most quickly and effectively through simple conservation methods, he said, given the time and investment needed to switch to it. other sources of energy.

This can include measures such as improving the insulation of the house, using more energy-efficient appliances and turning down the thermostat.

“My heating, my thermostat, actually pays for Putin’s missiles and bombs,” Di Castelnuovo said. “It’s good enough for me to lower it 2 degrees and wear a sweater instead.”

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