High energy prices blamed for industrial production fall

Worker in the wood industry.
Worker in the wood industry. Source: Raul Mee/ Estonian Forest and Wood Industries Association

The 7 percent fall in Estonia's industrial production was an unexpected surprise, the Bank of Estonia said on Tuesday. Entrepreneurs believe the cause lies in high energy prices.

Both the wood and metal industries performed poorly in September and there was only positive news from the energy sector, data from Statistics Estonia shows.

While metal workers found themselves in a good situation in the spring, the situation has now changed for the worse, Tuesday's "Aktuaalne kaamera" (AK) reported.

"We can say that we are afloat, but it is noticeable that since the summer there have been fewer orders and fewer inquiries, which is quite an unpleasant trend for us," said Raul Kütt, Federation of Estonian Engineering Industry CEO.

"Our industry is struggling precisely because energy prices are very high, and our main market in the Nordic countries is often cheaper than ours, and this is already starting to have an impact on our prices. The winter will probably be a difficult time," said Kütt.

Lack of competitiveness is one of the industry's biggest problems and the Estonian coalition is not helping large businesses with electricity price rises as governments are in other countries.

Bank of Estonia economist Kaspar Oja said the large drop in industrial production surprised him. While there was a fall in July, recovery was seen in August and it was hoped this would continue.

Kaspar Oja. Source: ERR

"But it seems that it didn't. The picture is not yet very clear as to what exactly happened in September. I think that one issue that might be suspected here might be high electricity prices. If that is the case, then hopefully the effect is temporary," he told AK.

The situation has been mixed for the wood industry. Pellet producers face increased demand for their products but other producers have not had the same luck.

One company that has been lucky is Matek which makes wooden frames for apartment buildings. Its main buyers are Germany and Scandinavia.

Executive director Sven Mats said bold decisions were taken at the right time.

"This year, when there were a lot of challenges with the availability of materials and labor, we still dared to take a risk and carry on. In that sense, I am happy to say that we have next year's production volume on paper today," he said.

However, there are signs things are not good in the Swedish market.

"We are already experiencing small defaults with our first clients, so it seems to have been a very sensible decision to spread different risks between different markets," Mats said.

But the company has also managed to increase its revenue streams by selling to new apartment building developments and a trend for retrofitting old apartments to meet modern energy efficiency standards. Several new projects have recently been commissioned in Germany.


Follow ERR News on Facebook and Twitter and never miss an update!

Editor: Helen Wright, Barbara Oja

Source: Aktuaalne kaamera

Hea lugeja, näeme et kasutate vanemat brauseri versiooni või vähelevinud brauserit.

Parema ja terviklikuma kasutajakogemuse tagamiseks soovitame alla laadida uusim versioon mõnest meie toetatud brauserist: