Steelmaker Lech-Stahlwerke halts production as power prices soar

Credit: REUTERS/Michaela Rehle

Adds Salzgitter, ArcelorMittal, German steel association

DUESSELDORF, March 10 (Reuters) - A spike in electricity prices has forced small German steelmaker Lech-Stahlwerke to halt production at its plant in Bavaria, the German state's only steel works, a company spokesperson said on Thursday.

"We are shutting down production on a daily basis," the spokesperson said, adding that power price developments would be closely watched to make short-term adjustments. "Production is not economically viable."

Lech-Stahlwerke's plant in Meitlingen produces about 1 million tonnes of steel per year and its electricity consumption is equivalent to that of a city with a population of roughly 300,000.

Like chemicals or cement production, steelmaking is among the most energy-intensive industrial processes and Lech-Stahlwerke's move reflects fears among producers about the impact Russia's invasion of Ukraine is having on power prices.

"We are observing with great concern that the rise in costs is being accelerated further by the outbreak of the war," Germany's Steel Federation said, adding this was felt most in the production of electrical steel.

Salzgitter SZGG.DE, Germany's second-largest steelmaker, is adjusting production at its electrical steel plant in Peine to avoid price spikes, it said.

Larger peer Thyssenkrupp TKAG.DE, meanwhile, said last month that higher power and gas prices had led to additional costs of at least 100 million euros ($111 million) over the past six months.

ArcelorMittal MT.LU, the world's largest steelmaker, earlier cut production in Spain in response to higher prices.

It said it has been operating its electric arc furnaces in Germany, Luxembourg, Poland, Romania and Spain in a stop-start mode for months "to avoid peak electricity prices that would significantly impact our ability to remain competitive."

($1 = 0.9015 euros)

(Reporting by Tom Kaeckenhoff; Writing by Christoph Steitz Editing by Madeline Chambers, Alexandra Hudson)

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