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UK:Rising gas prices cause chemical production
shut down - says CIA |
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2005-3-10
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High and volatile UK gas prices reached new levels over the last few days and have left some chemical companies no choice but to shut down operations. The Chemical Industries Association (CIA) now calls upon the DTI and OFGEM to take immediate, urgent action to resolve the situation before sites are closed down and companies make the decision not to manufacture in the UK.
The gas system operator, Transco, stated at a meeting today that there is ample gas to meet demand. Judith Hackitt, Director General of CIA, responded by saying, “There appears to be no rational explanation for the market’s behaviour. Our earlier calls for greater transparency and better explanation of the market are now truly urgent. These price hikes go way beyond what can be explained by a temporary spell of cold weather.”
The CIA gave evidence at a recent Trade and Industry Committee Inquiry that set out to investigate the high forward gas prices observed in October 2004. In the evidence received, it was reported that many companies had amended their contract strategies to be linked to spot prices – but this is now hurting too.
Following this contract strategy has meant that chemical companies have only two options: to pay £1 per therm (thermal unit) or close down operations.
The UK chemical industry can no longer absorb these extremely high and volatile gas prices, which have a knock-on impact to electricity costs. Current gas prices are seriously damaging UK industry competitiveness and in many energy intensive sectors, short-term stops may lead to longer-term job losses. If gas prices remain at this level the economic impact could be severe.
The chemical industry in the UK contributes over £5 billion annually to the country’s balance of payments from a gross output of over £46 billion. It accounts for 2% of UK GDP, 11% of manufacturing’s gross value added, and employs some 230,000 highly skilled people directly as well as supporting several hundred thousand related jobs throughout the economy nationwide. The industry is global both in terms of markets and ownership, with over 65% of CIA’s membership being foreign “headquartered”. Any significant imbalance in business operating environment between the UK and other locations can lead to the loss of UK output, trade and investment opportunities.
Peak daily gas demand occurred last Thursday 24 February 2005 at 419 million cubic meters (mcm), which is well below the last year’s peak at around 450 mcm.
The UK Chemical Industries Association (CIA) is the leading trade/employers’ organisation in the UK chemical industry. It has a membership of 150 companies, many of which are international, operating from over 200 sites in the UK. |
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| Chemical Industries Association (CIA) |
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