EU Industry Remains Cautious Amid Volatile Gas Prices

The outlook for natural gas prices is still too volatile for Europe’s industry to fully resume use of the fuel, despite significant drops in TTF benchmark prices since last summer, according to industries.

• Traders are closely watching for signs of higher gas consumption, with carbon contracts rising to a record this week amid expectations of a manufacturing rebound. Reduced fuel demand by chemical companies and metals producers helped to balance the market after Russia’s supply cuts last year.
• The TTF front-month gas price last stood at €48.10/MWh this morning, compared with intraday-highs of €339/196/MWh seen end-August. But despite easing prices, manufacturers seem to be struggling to plan ahead.
• “Today’s gas prices are certainly an important short-term relief,” Adolfo Aiello, director of energy and climate with the European Steel Association said. But “high uncertainty persists for medium-term price levels, hindering the visibility of companies’ planning.” The steel sector “remains very cautious about the evolution of gas prices,” Aiello said.
• That echoes comments from other industries, with fertilizer maker Yara saying earlier this month that they are still weighing their risks, and aluminum producer Norsk Hydro noting that energy prices “are still expected to be too high for widespread unsubsidized smelter restarts.”
• Uncertainties for the gas-outlook range from the pace of China’s economic recovery to Russia’s further moves on supply.