Written by: Basant El-Farmawi
Major industrial companies in Spain are facing increasing economic pressure as a result of the sharp rise in energy prices, which has put production sectors on alert. Energy markets have seen a rise in costs starting from oil, then natural gas, and finally electricity prices, creating a heavy burden for factories for whom energy costs are one of their largest expenditure items.
Implications of rising costs on production
These continuous increases have led to a noticeable slowdown in the performance of vital sectors such as ceramics, paper, chemical products, the iron and steel industry, and cement. Some of these industries have recorded a decline in production levels during the first half of the current year due to the inability to cope with high costs. Talk in industrial circles has begun to shift from mere expectations to a tangible reality regarding the possibility of moving factories to other areas that offer greater energy protection and more stimulating tax systems.
Comparison of costs and political pressures
Data shows a large gap in energy costs between Spain and other European countries; heavy electricity consumers in France face prices 34% lower than in Spain, while costs in Germany are 12% lower. This crisis coincides with a state of political uncertainty due to the upcoming general elections on November 29, raising fears of government decision-making paralysis that may extend until next spring.
Energy market outlook and the future
Market forecasts indicate that raw material prices will remain stable at high levels over the coming months. Brent crude is expected to remain above the $90 per barrel level, while remaining above $85 until the end of 2027. The natural gas market is also witnessing stability at high levels approaching 80 euros per megawatt-hour, increasing pressure on industries that rely on gas as a source of heat and as a raw material for electricity generation, in light of continued geopolitical tensions in the Middle East.
