Friday, September 29, 2023

Spain’s industry is fully suffering from the economic slowdown in Europe

The cold in Europe has already been felt in the Spanish industry. In economies like Germany that are struggling, the manufacturing sector predicts a worse second half of the year than a weak first half of the year. If until now the reduction was focused on products set by other manufacturers, the brake is now affecting consumer goods. So far, the spread of reduced demand has not spread to Spain, but it is only a matter of time, they continued. Yes, it has already started to affect activity and employment, with companies raising new temporary regulations in the employment regulation files (ERTE) due to the reduction in orders.

“Last year we had a decrease in electricity consumption of 25% and in 2023 we will see no recovery. With the current macroeconomic scenario we expect that the second half and 2024 the situation will be the same or possibly which is even worse,” said Pedro González, general director of the Association of Companies with Large Energy Consumption (AEGE).

According to data from S&P Global, the Spanish industry contracted in August for the fifth consecutive month and suffered the biggest slowdown so far this year. Production and new orders and purchases fell and left the index at 46.5 points (47.5 points in July), far from the 50 points that divide the decline from growth.

The stoppage is concentrated in European activity, while exports outside the continent are better. “We have noticed a decrease at the level of Europe. Although the demand is maintained at the moment in the national market, sooner or later the fall will also come,” said Clemente González Soler, president of Alibérico, an industry group and technology specialized in the production of semi-transformed aluminum products.

The weakness has existed since the beginning of 2023, but is accentuated with the arrival of summer

First there was the recession in Germany, but the decline reached the consumer economy. “The stoppage in Germany will have a full impact on the Spanish industry, which has always relied on or provided services to the center of Europe,” recalled the association of the Spanish metal industry, Confemetal. “Since February we have noticed a weakness in demand from our clients in central Europe, but since July we have noticed a slowdown in the consumption sector across the continent that has reached 50%,” added González Soler.

This reduction, which is also predicted by the largest steel association in the world, is important, for example, in the recent trial about the renewal of Celsa. In the ruling that gave the company control over investment funds, the judge stuck to the most conservative estimates – presented by creditors – supported by price expectations and production declines predicted by institutions such as the World Steel Association.

And the decline in activity is not limited to heavy industry. In a recent media meeting, Jordi Mercader, president of the Miquel y Costas paper group, warned that the plague will also affect them. “There was a drop in the cardboard sector; the stock fell, but at some point the trend should rebound. When? That’s what we don’t know,” he said.

The proper stocking of products to customers is the company’s argument for Fluidra to justify the reductions in sales suffered in recent months. However, orders did not reactivate – at a general level – as expected in the manufacturing sector and companies such as the swimming pool group had to lower their forecasts for all of 2023, suffered a decrease in sales of 14% in southern Europe and up to 28%. % in the center and north of the continent.

Although not yet on a large scale, the first ERTEs have already been presented

A slowdown in employment has already been noticed, although not much yet. “Our factory in Iberfoil, in the province of Huesca, was the first to notice this, although no customers have been lost. Many industrial plants in Europe have closed due to weak demand,” said González Soler. The first ERTE has already been put on the table: the Aludium group, which includes three former Alcoa factories in Spain and France, has sent its staff from Amorebieta and Alicante home for several days and the Tableros Losán also intends to apply an adjustment to the staff of Soria.

Unions maintain that the temporary layoffs are not yet large, but they add another factor to the uncertainty map. “We are concerned that the current political instability will stop the investment plans to meet the reduction of employment due to the new productive model. We have an agreement with the employers’ associations and we are waiting for the main political parties who agree to agree to support it. , “explained Juan Antonio Vázquez, Secretary of Industrial Policy of the UGT.

And the role of politics has sparked criticism among the industrial business community, although the focus is directed at the European Union, especially at a time when there is a consensus to recover the activity of the continent. In May, the European Round Table for Industry published a survey that stated that 57% of large European companies are considering moving investments to the United States in the next two years after the aid package was announced. in the Biden administration.

Repsol’s CEO calls for an energy policy that puts industrial competitiveness at the center

“Europe has a problem with the industry because it doesn’t take care of it. There is too much regulation compared to the United States and Asia, it doesn’t make sense that we can’t make something here, but we can import it, ” complain. the president of Alibérico. The CEO of Repsol, Josu Jon Imaz, also asked for a model that does not contradict the competition of the industry, during the VIII Energy Forum organized by The leader called for energy to “have a life of its own” and demanded a policy with competitiveness and affordable prices for the industry and families at its heart.

Even if the price of energy is halved by 2022, it remains above what it was before the pandemic. And in some sectors, supply chain tensions have yet to be resolved. “The prices are still high and it is very difficult to compete,” they claim from Confemetal.

Without it, it will be very difficult to compete with the cost policy of Chinese companies after the reopening of their borders. The president of Miquel y Costas admitted this, because the paper sector has already noticed the impact of cheaper articles from the Asian giant. “In some cases they sell by throwing away,” added González Soler.

The industry in Spain adds five months of decline

According to data from the purchasing managers index of the Spanish manufacturing sector in the HCOB index prepared by S&P Global, the country’s industry recorded its biggest decline this year in August and continues its negative streak. The main drag was the decline in orders, which fell for the fifth consecutive month, largely influenced by foreign markets. Export orders showed a “sharp decline,” the consulting firm said.

The decrease in demand caused a decrease in production, which fell for the fourth month in a row, so companies reduced their purchases and in August there was the second worst cut in three years. “We are sure that the manufacturing sector has entered a recession, which started in the second quarter. We estimate that the decline of the industry is getting worse, which is close to -1% this quarter,” defense of Cyrus de la Rubia, head the economist. of the Hamburg Commercial Bank.

However, the analyst agreed with the unions that the decline in activity has not yet affected employment. Despite this, he warned: “In the short term the situation will get worse before it gets better again.”

Nation World News Desk
Nation World News Desk
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