Some Of Europe’s Gas Demand Destruction Might Be Permanent: Analysts

Several analysts project some of Europe’s natural gas demand destruction might be permanent as lower gas demand from the industrial sector continues to hit the continent.

• The slow recovery highlights the particular nature of last year’s crisis. Compared to previous downturns, it’s taking longer for a rebound to materialize, according to Sabrina Kernbichler, power analyst at S&P Global Commodity Insights
• “This is just a different type of crisis because of how it hits the industrial sector. The tricky question is how much demand destruction is permanent,” Kernbichler said.
• Industrial gas use is some 20-25% lower than the average of the past five years, according to Andy Sommer, head of fundamental analysis and modeling at Axpo. While part of that may come back “sooner or later,” some is likely to be destroyed for good.
• More than 5% of the demand reduction might not be recovered, according to Gyorgy Vargha, CEO of MET International.
• Vattenfall as much as 10% to 20% of the missing demand could be permanently erased.
• Some of the gas demand destruction could be permanent due to its nature, the switch to alternative fuels or the aim to electrify processes. Industrial players could also look to move production elsewhere, after last year’s gas prices spikes forced several industries to curb production.