The energy crisis that has closed steel mills and aluminum smelters across Europe is now spreading to the continent’s fashion industry.
Thousands of small factories and workshops that supply brands such as Gucci and H&M have watched their business models unravel amid the surge in natural-gas and electricity prices following Russia’s invasion of Ukraine and its decision to reduce the flow of gas to the continent. Energy costs for many textile makers have risen from about 5% of production costs to around 25%, slashing their profit margins, according to data from European textiles and apparel trade group Euratex.
Energy prices have risen so high, textile makers said, that utilities and other energy vendors, concerned about not getting paid, are demanding that the textile companies secure bank guarantees or come up with cash advances to cover months of expected energy bills. In Italy, Europe’s biggest textile producer, many manufacturers said they can no longer line up energy-purchasing agreements that previously insulated them from short-term price fluctuations.
Italy and some other Southern European nations have asked the European Union to adopt a cap on wholesale gas prices across all member countries, a measure Germany and the Netherlands oppose. The European Commission, the EU’s executive arm, on Tuesday published proposals seeking the power to impose an emergency cap on the price of natural gas on the bloc’s main trading exchange.
Source: WSJ
