The soaring of natural gas rates by up to 400% in recent months, compared to the period before the pandemic, in 2019, and the resulting growth of prices in power markets, which have topped 200 euros per megawatt-hour, have inflicted a 20-40% increase in production costs for Greek industries, according to a statement by Hellenic Production, a nonprofit association of Greek industrial firms.
Those effects are much more significant for local industries compared to their competition in the rest of Europe, as in Greece all trading on the set of energy produced is conducted via the daily wholesale market; that is in contrast with the other European markets, where most industries operate through bilateral contracts with fixed prices that offset the risk in case of a sudden rise in rates for European industries.
Given that electrical energy suppliers pass the increased costs on to Greek industries, the environment created is particularly adverse, especially for small and medium-sized manufacturers; this is because the soaring energy rates have come on top of the parallel jump in the international prices of raw materials, shipping costs and the serious problems and delays in global supply chains.
All these factors are leading to an unprecedented increase in production costs in Greece, which is impossible for companies to absorb. There is a serious risk that the increased costs will be passed on to consumers, or some enterprises will have to face a reduction of output and or even suspend operations, the statement warned.
Greek manufacturing has been the country’s strongest pillar amid the health crisis, softening the blow to the economy after the collapse of tourism receipts last year. In the first half of this year, goods exports posted a 22.9% increase from last year, and an 18.3% rise from the first half of 2019.
“The handling of the explosive increase in energy costs for industry is not a unionist matter. It concerns the maintenance of positive growth momentum, international competitiveness and the country’s exports and employment, and is about containing the risk of an inflationary cycle with terrible consequences,” said the statement.
“Therefore it is time for responsible decisions so as to tackle in a timely manner a problem that can seriously undermine the growth prospects and social cohesion,” Hellenic Production concluded.