The US Industrial Complex Is Starting to Buckle From High Power Costs
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ByJoe Deaux and Naureen S Malik
July 7, 2022 at 6:00 PM GMT+8


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Europe’s fertilizer plants, steel mills, and chemical manufacturers were the first to succumb. Massive paper mills, soybean processors, and electronics factories in Asia went dark.

Now soaring natural gas and electricity prices are starting to hit the US industrial complex.

On June 22, 600 workers at the second-largest aluminum mill in America, accounting for 20% of US supply, learned they were losing their jobs because the plant can’t afford an electricity tab that’s tripled in a matter of months. Century Aluminum Co. says it’ll idle the Hawesville, Kentucky, mill for as long as a year, taking out the biggest of its three US sites. A shutdown like this can take a month as workers carefully swirl the molten metal into storage so it doesn’t solidify in pipes and vessels and turn the entire facility into a useless brick. Restarting takes another six to nine months. For this reason, owners don’t halt operations unless they’ve exhausted all other options.

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At least two steel mills have begun suspending some operations to cut energy costs

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In May, a group of factories across the US Midwest warned federal energy regulators that some were on the verge of closing for the summer or longer because of what they described as “unjust and unreasonable” electricity costs. They asked to be wholly absolved of some power fees—a request that, if granted, would be unprecedented.

It’s no wonder. By the beginning of June, natural gas prices had tripled what they were a year earlier, threatening households and businesses alike with some of the biggest utility bills they’ve ever seen.

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Manufacturing overtime hours have already declined for three straight months, the longest downward stretch since 2015, and a measure of US manufacturing activity weakened in June to a two-year low as new orders contracted. A week after Century’s announcement, the nation’s largest aluminum producer Alcoa Corp. said it’s closing a third of its production at a mill in Indiana because of “operational challenges.”

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Manufacturing isn’t the bellwether of the US economy it once was. The plants that 70 years ago employed more than a third of the nation’s labor force now account for about 8% of nonfarm workers. An industrial downturn on its own won’t tip us into a recession, but it could if combined with weakness in other sectors.

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There is a lot to blame for this year’s surge in US energy prices: Russia’s invasion of Ukraine; the ensuing surge in US natural gas exports to markets overseas; extreme weather brought on by climate change; aging fossil-fuel-fired power plants retiring at a record pace. They’re all coinciding with a sharp rebound in post-pandemic demand.

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The Industrial Energy Consumers of America has been calling on the Biden administration for months to limit the amount of gas US energy suppliers send overseas, warning that exports would eventually lead to supply shortages at home. But a measure like that would set a dangerous precedent and threaten the billions of dollar of investments in liquefied natural gas terminals along US shores. Shipments overseas have so far remained unfettered.

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costs have risen so high that some are having to put millions of dollars of credit on the line to secure power and gas contracts.





https://www.bloomberg.com/news/articles/...es-to-shut
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