Rising energy prices and lack of raw materials “could suspend production from May”
Portugal’s metallurgical and metalworking sector has warned that it is running on borrowed time.
Until the end of April it will continue to benefit from collective energy purchases made last year, explains Lusa – but once May hits, companies fear soaring energy costs and raw material shortages will bring a hiatus in prodction.
Rafael Campos Pereira, vice president of the Association of Metallurgical, Metal Mechanical and Allied Industries of Portugal (AIMMAP), says he has “no doubt” that “companies will have to reduce their normal periods of activity”.
The ‘collective energy purchases’ made last year mean companies are “still paying last year’s fixed prices, so, in some cases, five, six times less than [the price at which] the market is now…” he explains.
“As of May 1, companies will see their energy costs increase perhaps three or four times, unless the situation evolves.”
And any hope that new, favourable, collective energy purchases could be the answer have gone. “Energy suppliers are no longer ready to fix prices”, he said. Even if the sector clubs together to make joint purchases, it will have to do with “with indexed, variable prices”.
The “fundamental answer” to Portugal’s problems lies in European decision-making – which is one of the many reasons prime minister António Costa is in Brussels this week, pushing for agreements on a number of topics, particularly when it comes to the reduction of IVA on fuel.
AIMMAP’s hope also is that the European Commission can be persuaded to ‘eliminate taxes on imports from outside Europe’, as this too will help the sector – and to a wider extent, the whole country.
Given the uncertainty in almost every aspect of life and business, Campos Pereira stressed that companies in his sector “have many orders”. They are not ‘hanging around with nothing to do’. What is happening is that they run the risk of not being able to meet those orders because energy costs are unaffordable and because raw materials are in short supply.”
According to ATP, the Portuguese Textile and Clothing Association, half its affiliated companies are already making stoppages due to rising energy costs. ATP warned earlier this week of “imminent insolvencies” if mechanisms such as furlough are not reintroduced.
“The sector is very resilient,” the ATP president, Mário Jorge Machado, told Lusa. “Companies are resisting as much as they can, but if this situation continues for more weeks, I am unfortunately convinced that we will have insolvency situations because companies have not been helped, nor have there been mechanisms to allow them to adjust to this situation.”
According to Machado, so far ATP has only been made aware of one case of definitive closure, but around 50% – 70% of companies in the sector are currently making temporary halts to activity, for a few days a week, to try and mitigate the effects of rising energy prices.
“Companies are working fewer days a month, in an attempt to wait for the price of gas to come down somewhat, because working at [current] gas prices, companies are making a loss every day,” said Machado. “The fewer days they work, the less loss they have.”