Finland Warns Energy Crisis May Hold Back Its Industry, Shut Down Factories

Across Europe, some factories have already been forced to shut down due to soaring global energy prices and insecurity over future gas supplies from Russia. Earlier, Finland along with other Nordic nations warned that in the event of a gas shortage, it would prioritize households and essential social services above industrial output.

Finnish manufacturers have warned they may be forced to scale down production if natural gas prices continue to rise, national broadcaster Yle reported.

European gas prices recently soared following the conflict in Ukraine and Europe's sanctions, as well as the continent's plans to wean itself off Russian energy. As of now, natural gas prices are five times higher than a year ago and may rise further. Furthermore, Finland specifically lost its gas supplies from Russia after it refused to comply with Moscow's demand to pay in rubles.

While Finland's industrial sector is not as heavily reliant on natural gas as many other European countries, such as Germany, completely phasing out natural gas appears to be an impossible task for Finnish captains of industry. While only representing some five percent of total energy consumption in Finland, gas is an important part of the energy cocktail.

Earlier, Finland said that in the event of a gas shortage it would prioritize households and essential social services, such as healthcare, above its industrial needs.

The country's forestry and chemical sectors have expressed particular concern regarding the coming winter, admitting that the temporary shutdown of factories cannot be ruled out. Today, around one fifth of companies in the Finnish chemical sector use natural gas as an energy source or raw material. Among forestry companies, some five percent use gas to fuel factories.

“It's possible that production at some facilities will decrease or halt if the gas price reaches impossibly high levels or if supply issues arise,” Ahti Fagerblom, the head of energy and climate policy at the Finnish Forest Industries, told Yle, adding that forestry companies are already switching to fuel oil to replace natural gas.

Mika Aalto of the Chemical Industry Federation of Finland said that the burden of replacing natural gas was heaviest for smaller companies, as investments into other energy sources are costly and time-consuming, whereas natural gas in itself serves as a raw material.

Finland's gas supply hinges on access to liquefied natural gas via a leased floating terminal. A number of European ports have also started building their own LNG terminals, expanding existing capacity or obtaining it overseas, in a bid to reduce reliance on Russian-sourced gas.

Last week, the EU's energy ministers agreed to a plan for member states to voluntarily reduce their use of natural gas consumption by 15 percent from the beginning of August until the end of March.

Earlier in June, Germany switched to stage two of its three-tier emergency gas plan amid skyrocketing prices and reduced deliveries via the Nord Stream 1 pipeline due to maintenance. As part of the plan, the government decided to launch idled coal plants to reduce the share of gas in power generation, in effect canceling its “green switch” energy strategy.

In 2021, Russia supplied the EU with 40 percent of its natural gas. Germany, Europe's largest economy, was the largest importer, followed by Italy. Some European factories have already shut down due to soaring global energy prices and insecurity over Russian gas supplies.