The metallurgical and metalworking sector is until the end of April benefiting from collective energy purchases made last year, but companies say they may scale back their activity.
Portugal’s metallurgical and metalworking sector is until the end of April benefiting from collective energy purchases made last year, but companies say they may scale back their activity from May in the face of soaring energy costs and raw materials shortages.
“We also think that we run the risk from May, with very high energy costs and without enough raw materials to work with, of some companies having to reduce their normal periods of activity, without a doubt,” said the vice president of the Association of Metallurgical, Metal Mechanical and Allied Industries of Portugal (AIMMAP), Rafael Campos Pereira, in comments to Lusa.
According to Pereira, at present “a large part” of the sector’s companies “are still benefiting from the collective energy purchases that were made by the association itself in 2021, as it had done since 2011, and which take effect until April 30.
“Which means that, at the moment, a large part of the companies in our sector and those associated with AIMMAP 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 stressed.
Despite the “relatively safe situation” at the moment, Pereira said, “as of 1 May, companies will see their energy costs increase perhaps three or four times, unless the situation evolves,” given the surge of energy prices that has happened in the meantime.
Additionally, he noted, “energy suppliers are no longer ready to fix prices” so, although the sector may continue to make joint purchases, it will have to do so “with indexed, variable prices” and no longer at fixed prices as it has done until now.
While the relative weight of energy costs is lower in the metalworking sector than in some others, such as textiles, the vice-president of AIMMAP said, there are sub-sectors, such as foundries, that have a larger “weight” of energy, particularly natural gas, but also electricity.
In this context, the association vice-president described as “fundamental an answer at a European level” and said that “Portugal’s government must also be committed to this … with the group purchase of energy.”
With regard to raw materials, AIMMAP also considers “it fundamental that the European Commission’s taxes on imports from outside Europe be eliminated” and is “pressing the government, this time, to take a position in line with this need of Portuguese industry.”
The European sectoral association, he added, “is also diligent in this direction with the European Commission.”
AIMMAP is also calling for urgent “measures to protect employment” such as the reactivation of the furlough or simplified layoff measure available during the pandemic “to address these difficulties”.
As for the argument of the minister of economy, Pedro Siza Vieira – that the government prefers “to give support so that companies continue to work rather than give support so that workers go home” – Campos Pereira counters: “Our companies do not need any incentive to work. I think that the government, there, doesn’t really see the problem. We just want to protect employment and protect activity.
“Companies want them to work,” he went on. “What’s more, companies have many orders; what is happening is that they run the risk of not being able to meet them because energy costs are unaffordable and because raw materials are in short supply.”
In the textile sector, more than half of companies are already making temporary stoppages due to rising energy prices, according to the Portuguese Textile and Clothing Association (ATP), which on Tuesday warned of imminent insolvencies if mechanisms such as furlough are not implemented.
“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 the association has only been made aware of one case of definitive closure, but around 50% to 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.”