French industrial gas demand has fallen sharply in recent weeks as firms that have a large share of unhedged supply may have had to curtail operations in response to unusually high gas prices.
French industrial gas demand has moved further below the three-year average this month (see industrial demand graph).
Fertiliser company Yara said earlier this month that it was curtailing production at its Le Havre plant in France as a result of high gas costs.
And industry association CLEEE, which represents industrial and large-scale commercial sector customers, told Argus that several of its members are "postponing production".
"Firms cannot survive with energy prices at around €80/MWh", with many of CLEEE's members insufficiently hedged, the association said.
The Covid-19 pandemic partly explains why companies have not hedged their supply sufficiently, according to the association. Large industrial firms "did not benefit from flexibility clauses from suppliers" and were forced to resell gas at a loss in 2020 as demand fell owing to government measures to limit the spread of the virus, CLEEE said. This in turn led to companies being inadequately hedged, while industry players were unprepared for such large gas price increases, the association said.
The majority of the association's members have contracts indexed to the French Peg or Dutch TTF gas hubs running until 2024 or 2025, the association said.
And firms are looking at next winter with "anxiety", CLEEE said. So far, association members are "very, very unhedged for 2023", and the real consequences of the energy crisis are likely to be felt at the end of the year, it said.
The French government laid out a subsidy scheme last week to help industrial gas consumers that would make losses in 2022.
