We import a strategic EU raw material from Asia. According to an expert, we are shooting ourselves in the foot

Following his January visit to the Slovalco plant in Žiar, Prime Minister Robert Fico announced assistance to energy-intensive enterprises in the form of compensation. This should be a solution that allows companies to purchase cheaper electricity. Due to emission allowances, the price of electricity in companies has risen to a level at which production becomes unsustainable, as in the case of the Slovalco aluminium smelter.

Source: pluska.sk

Under current conditions, no aluminium smelter in the European Union can operate without mechanisms that would at least partially compensate for high electricity prices. These are today significantly affected especially by emission allowances,” said Andrej Lasz, Secretary General of the Association of Industrial Unions and Transport (APZD). „Producing one tonne of aluminium requires approximately 14 MWh of electricity. If electricity in Europe is around 50 EUR/MWh more expensive than elsewhere in the world, the producer starts each tonne with a handicap of approximately 700 EUR. At an average aluminium price of around 2,300 EUR per tonne in 2025, this amounts to almost a third of the product's value,” said Marián Slivovič, partner of the Penta group, which together with Norsk Hydro owns the Slovalco plant.

This is not about favouring companies

The considerable difference in prices arose as a result of trading in emission allowances. „In practice, however, it significantly increased the price of electricity, because the costs of emission allowances are reflected in the price of electricity production. Producers of electricity from coal and gas must purchase emission allowances, which makes them the most expensive sources – and it is precisely they who today determine the market price of electricity,” adds Slivovič. For this reason it is important that a compensation mechanism functions for energy-intensive enterprises. „This is not about favouring specific companies, but about maintaining production, jobs and strategic capacities in Europe. Emission allowances as a stock-exchange instrument have, in our opinion, missed their original purpose. Their price today fluctuates significantly depending on the interest of financial institutions, which makes production in energy-intensive enterprises extremely unpredictable,” argues Andrej Lasz.

Relying on one's own capacities

After his visit to the Žiar plant, Prime Minister Robert Fico came up with a proposal to limit the allowance system for several years. He addressed it to the head of the European Commission, Ursula von der Leyen, to whom he sent an open letter. „One of the options I propose is to declare a four- to five-year holiday from the application of the emission allowance mechanism,“ he wrote. Aluminium is among the EU's strategic raw materials, defined in the Critical Raw Materials Act. „Whether the EU wants to or not, in the future it will probably have to rely much more heavily on its own domestic capacities. This is having a very intense impact on various sectors, including energy and industry,” explains Radovan Potočár, analyst of the Energie-portal.sk portal. EU countries are overwhelmingly dependent on imports of primary aluminium. The EU consumes around 6-7 million tonnes of aluminium per year. „Net imports, according to the latest data for 2024, amount to around five million tonnes,” said Potočár. According to him, EU enterprises face many regulations and forced costs that do not burden their competitors in China, India, Turkey or the USA. „Pushing out EU industry and replacing its production with imports, which, by the way, in many cases come with a much higher emissions footprint, is certainly not the way forward. By doing so, EU countries may improve their emissions statistics, but they are shooting themselves in the foot without influencing the global development of emissions. Governments should certainly address the competitiveness of energy-intensive sectors,” adds expert Potočár.

Industry demands fair conditions

Some countries have schemes through which they support enterprises in this very segment. As Radovan Potočár emphasises, these are, for example, the so-called “compensation for indirect carbon costs in the EU”. Among the countries that use this instrument, Slovakia continues to be among the less generous ones. Several states also help energy-intensive industry with energy prices. „Since 2011, France had the ARENH scheme in place, under which part of the electricity from nuclear power plants went at a preferential price directly to energy-intensive enterprises. In a modified form, the programme still continues. Production enterprises with high electricity consumption thus gain access to a relatively cheaper commodity from nuclear units,” states Radovan Potočár. „Energy-intensive industry is not asking for subsidies or special advantages. It only asks for fair and just conditions, the kind its global competitors have. If the distortion arose through a political decision, it is legitimate for it to be removed through a political decision as well,” adds Marián Slivovič.

Article taken from the portal pluska.sk.

SOURCE: APZD