Its direct competitor HAK announced last week that it would stop production in the winter, but Baltussen Konservenfabriek from Driel will continue to work for the time being. There is no other way. Director Ruben Bringsken: “We have agreements with farmers about what they harvest and what we process. And we have an annual contract with retailers.”
But yes, it is difficult, cooking vegetables at the current gas rates. Bringsken won’t divulge too much about the exact financial situation, but: „We are in discussion with the retailers about the prices. And they are not the easiest buyers, so to speak. In that sense, it is not just in the European backyard war.”
In recent weeks, more and more big names from the Dutch business community have come to a standstill as a result of high energy prices. Although the gas price has been slightly lower in recent days, it is still ten times higher than was usual for years.
Zinc factory Nyrstar and fertilizer factory Yara – the largest gas consumer in the Netherlands, with an annual consumption equivalent to that of 1.3 million households – were the first companies to partially or completely stop production, as were aluminum producer Aldel and a number of lesser known names. The large chemical complex of Chemelot in Limburg is now also running at lower capacity.
HAK was added last week. That will not put vegetables in pots for six weeks next winter, it explained in an extensive statement. According to HAK, it is not profitable to continue producing during this period. By means of a complicated alternative production planning, the company says it will prevent empty shelves.
The temporary or long-term factory closures are the most extreme and most striking examples of the consequences of the current energy crisis. But in the meantime, many more entrepreneurs are faced with very difficult considerations due to energy prices – even if they do not close immediately. Their decisions and dilemmas show how energy prices resonate in the economy.
Fifteen degrees at Intratuin
Sometimes that is very clear to the consumer. For example, a spokesperson for garden center Intratuin explains that it will get colder in the stores of the chain. The ‘cold’ greenhouses no longer heat, and in the warm greenhouse – for house plants, among other things – the temperature drops to around 15 degrees. Also, some “exotic plants” may become unavailable during the winter months, or may be kept in special, small, warm areas.
Yet what consumers immediately notice is often only a small part of what goes on in boardrooms. Can you increase the prices of your products without losing too much sales? Are you going to invest in innovation or not? Do you pause certain things?
“We are currently trying to reduce overheads,” says Rudi Peeters. He is director of Vandersanden, a concern with 800 employees that has fifteen brick factories in the Netherlands, Germany and Belgium. That industry uses a lot of gas in the ovens. “For example, we put the start-up of an IT project on hold for a while. That was about replacing a large system.”
Another brick manufacturer, Rodruza from Gendt (including the bricks for the Amsterdam Holocaust Memorial) has just developed a new innovation – a special finish that gives bricks a nicer appearance. But it is not yet going to make major investments in scaling up its production, explains director Ivo Würzner by email. This is not possible due to the energy crisis.
At Vandersanden, which makes paving stones for the municipality of Amsterdam, among other things, the workload for some staff members has increased considerably, according to Peeters. “We started working out a whole series of scenarios. Not in too much detail, that leads to a lot of delay. But we look, for example: can we produce less for one or two weeks in order to consume less gas without jeopardizing deliveries? Can we produce more slowly? It’s not either stop or run.”
According to Peeters, it is also important that you continue to communicate well with your staff. “There is also uncertainty. They hear in the market that some factories are starting to shut down. And they have their own living situation. You then have to calm down and be transparent, but not deny that there is a problem. So I say: if another gas pipeline explodes, we will come to a halt.”
Exactly what a company decides can depend on all sorts of factors – including chance. At fertilizer factory Yara in Sluiskil in Zeeland (approximately 700 employees), two of the three factories were barely standing still, or one was already up and running. A German factory of the international group was struggling with technical problems, so Sluiskil was needed again, explains spokesman Gijsbrecht Gunter. “It was still warm, which fortunately gave a smooth start.” This can normally take days.
Yet one of the three factories is still shut down. “We are actually Yara’s most efficient factory. But the one in Le Havre, for example, has African gas, which is cheaper than gas from the Amsterdam stock exchange or from the port of Zeebrugge. If the difference becomes too great, you can no longer manage on efficiency.”
In any case, the simple trade-off it may seem to the outside world (costs versus revenues) is seldom. “It’s looking for the point where you can profitably produce an amount of ammonia, or at least minimize the losses,” says Gunter.
‘Shutting down also costs money’
That is a difficult sum for companies, explains sector economist industry Albert Jan Swart of ABN Amro. They deal with different gas contracts and factory constellations – and it also depends a lot on demand. “You may be able to raise prices for some customers, but not for others. Maybe half of your customers say: if it gets that expensive, we’ll stop purchasing.” Running two factories at half power is not always convenient, so one will close, for example.
In the end it really depends on specific things. Opening fewer days is absolutely not an issue at Intratuin, according to the company itself. “The greenhouse must be heated, whether we are closed or not, because of the plants,” said the spokesperson. In order to save a lot of energy, a branch would therefore have to be empty and closed for a longer period of time, and the company does not think about that.
“Shutting down also costs money,” says Bringsken of Baltussen Konservenfabriek (40 employees). “Your staff have to do something else, for example.” Yara is currently doing a major maintenance shutdown; so the staff has plenty to do, says Gunter. Bringsken is more likely to stop working at night for his company; it would then only run during the day as long as gas prices remain high. “That is possible outside the harvest season, then you process what comes from storage. You better plan that. And if you don’t want to build up stocks, you can run one shift and continue to deliver.”
Again, with brick factories, a kiln you turn off sometimes takes damage – they tend to shrink when they get cold. “And starting up sometimes costs more gas than running an oven,” says Peeters van Vandersanden.
Like Baltussen, he is also in talks with customers about prices. According to Peeters, it helps to have extensive conversations. You then notice what is useful for customers. “For example: yes, increased prices, but fixed for a longer period than before. And often they are really understanding.” According to his own words, he now also often joins his sales team. “They are now on the front line.”
Meanwhile, some boardrooms are thinking more and more about how this should proceed in the long term. Gunter van Yara: “Over the past ten or twenty years, we have focused on getting the most out of the factory. Always bring in raw materials along the same route, little buffering on location, maximum product production and fast shipping.”
Perhaps, he says, a European Yara factory needs to be redesigned to better deal with high and fluctuating prices. The factory is currently working on that, says Gunter.
Swart of ABN Amro thinks the developments are worrying. “If this crisis continues for years, I think there is a real chance that factories on other continents will take over some roles for good.”
A version of this article also appeared in the newspaper of October 8, 2022