Demand for natural gas from European industry will fall again

Despite a slight increase in industrial natural gas consumption this year, heavy industry in Europe is likely to return to cutting gas consumption next year amid a tighter gas market and higher prices, analysts and officials said from the industry for Bloomberg.

Since the 2022 energy crisis, European industry has been squeezed amid skyrocketing energy costs and weak industrial demand in weakening economies. European companies have lost competitive advantages to non-EU firms, especially in Asia, with its low labor costs, and in the US, where gas prices are four times cheaper than in Europe.

Globally, gas demand is growing this year at a stronger pace than in the past two years and is set for a record high in 2024 and 2025, the International Energy Agency (IEA) said in a report on earlier this week.

Industrial gas demand in Europe is recovering as prices have normalized and is also contributing to demand growth, even if it remains well below pre-crisis levels, the IEA said in its annual global gas security assessment.

However, after this year’s rise in European industrial gas demand, consumption is set to decline in the coming years as companies continue to struggle with higher energy costs compared to other regions and weaker economies.

Next year, industrial gas demand in Europe is expected to be 21 percent below the 2017-2021 average due to weak economies in Germany in particular, Energy Aspects analyst Erisa Pasko told Bloomberg.

Cefic, the European Chemical Industry Council, said in its September monthly report that “Energy is still more expensive than before the crisis and is not competitive on a global scale.”

“Gas prices in the EU – currently 4.7% higher than in the US – need to fall and overall business confidence in the chemical industry needs to improve,” the chemicals industry body said.

Despite some improvements earlier this year, capacity utilization in Europe’s chemical industry of 75.2 percent remains well below the long-term average of 81 percent, Cefic said.

By Charles Kennedy for Oilprice.com

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