Country?s heavy industry resorts to desperate measures

Greece?s heavy industry, including the steel, cement, aluminium, copper and paper sectors, is desperately looking for ways to reverse some of the negative effects of the economic crisis, with some companies selling as much as 70 percent of their products abroad at cost in order to maintain the production flow.

The country?s energy-intensive industries are in a daily struggle for survival in a domestic market that is recession, with little liquidity, few sources of funding, rising interest rates and a slew of austerity measures that seem to ignore the effects on the real economy, such as high taxes on energy.

According to officials from the Union of Industrial Energy Consumers (EBIKEN), the cost of electricity and natural gas for energy-intensive industries can constitute as much as 35 percent of their total cost of production. From 2010 to the present, the cost of high-voltage energy used by industry has gone up 10 percent after the introduction of an emergency tax of 2.50 euros/megawatt, when in Germany it is 0.50 euros/megawatt. Medium-voltage energy went up by 15-20 percent in the same period with the imposition of a consumer tax of 5 euros/megawatt, an average hike in rates of 9 percent and a rise in the tax on energy generated from cleaner sources such as natural gas.

The introduction of a consumer tax that is 10 times higher than the European Union minimum in September and a massive increase in taxes on petrol and liquified gas have further increased the cost of energy for heavy industry.

The overall result of these developments, according to EBIKEN, is that the Public Power Corporation is looking to raise its prices by up to 20 percent and increase other operational charges as well.

?It is clear that energy-intensive industries, which are already experiencing heavy losses, no longer have the ability to absorb the high cost of energy. We need to restructure the way energy is priced and to rationalize its taxation so that the cost of industrial energy comes down rather than increasing,? said one official from EBIKEN who asked not to be named.

Regarding the other effects of the crisis on Greece?s heavy industry, EBIKEN cited the conclusions of a study on the results of 12 companies listed on the Athens Exchange in the sectors of steel, cement, aluminium, copper and paper. The study showed that between 2008 and 2010, their turnover shrank by 33 percent, domestic sales went down by 60-70 percent on the back of an ailing construction sector, and exports managed to somewhat make up for the losses, though these were at cost.

The 33 percent drop in sales in the two-year period was also accompanied by a 67 reduction in earnings before interest, taxes, depreciation and amortization (EBITDA), while losses of 153 million euros in 2010 replaced gains before taxes of 474 million euros in 2008, or 10 percent of turnover.

Representatives of these sectors say the situation would be even worse if it weren?t for the fact that companies have been making concerted efforts to improve their production costs and remain competitive while at the same time preserving jobs.

?Today, heavy industry is producing 40 percent of what it was in 2008, with everything that this entails for gross domestic product and employment. Losses, however, keep piling up and our company may be forced to close,? one representative said.

The structural problems faced by heavy industries, such as the complexity of licensing and the absence of infrastructure for environmental management, not only increase risks for existing industries but also deter potential foreign investors.

Another significant disadvantage in terms of competitiveness is the absence of a management system for solid industrial waste, which forces local industries to export their waste at a cost that is five to eight times higher than that faced by their competitors abroad.

Subscribe to our Newsletters

Enter your information below to receive our weekly newsletters with the latest insights, opinion pieces and current events straight to your inbox.

By signing up you are agreeing to our Terms of Service and Privacy Policy.