Gas and electricity prices have risen massively because of the Ukraine war. This is not only a problem for individual consumers, but also for companies. There have long been reports of mass layoffs and plant closures.
When Wolfgang Mannheim talks about KTS, the Kärlicher Ton- und Schamottewerke Mannheim
Mannheim also explains where KTS is “in there”: in motors, wind turbines, pencil leads. “We’ve been around since 1867, so for more than 150 years,” he says in an interview with FOCUS online. The 53-year-old is proud of what he and his family have achieved.
But that seems to be in jeopardy now. Because the fireclay factories are struggling with the increased energy costs – like many of the approximately 3.8 million small and medium-sized companies in Germany.
“The price level is deadly for us, but also for many other industries,” says Mannheim. He has been working for KTS for 25 years and is the fifth generation to run the family business. The 53-year-old describes “cost increases at almost every level”, especially for electricity, gas and diesel.
KTS is a company in which clay is not only mined, but also mixed, crushed, dried, ground, packaged and fired. Electricity, gas and diesel are therefore central to the functioning of operational processes.
It is true that the fireclay plants buy part of their energy in advance via tranche agreements. Even before prices skyrocketed, the company had stocked up on gas for 2022. With electricity, however, things were different.
“We only had 30 percent protection in January. I bought more electricity at the beginning of the year,” says Managing Director Mannheim. However – because of the Ukraine war – at significantly higher prices than last year.
The increased energy costs meant that Mannheim had to raise prices for its customers three times in 2022. “I explained to them that there was no more room for negotiation,” he says.
So far, his business partners have supported the increases. “The third time, however, some thought that such dimensions had now been reached that they were no longer able or willing to manage further increases.”
According to Mannheim, the main reason is that these clients can no longer pass on the increases in their markets. He remembers a customer who had to file for bankruptcy because the energy costs were too high.
KTS is just one of many medium-sized companies that are struggling with the energy crisis. Bakers, restaurant owners, steel workers – many of them fear for their existence. Some companies are already on the verge of collapse, for example the porcelain manufacturer Eschenbach.
After 130 years, the oven is going out in Triptis, Thuringia, and all of the nearly 100 employees are about to be laid off. As the MDR reports, the company will close its doors at the end of the year.
“Almost three quarters of those surveyed by the German Association of Small and Medium-Sized Enterprises state that energy prices are a heavy or very heavy burden,” says Hanno Beck in an interview with FOCUS online. He works as an economist at the University of Pforzheim.
“This is also due to the fact that energy is one of the most important production factors. If energy becomes more expensive, this quickly affects all production chains,” he says. It’s not just gas, petrol or electricity that’s costing more and more, but also other inputs that are produced with energy.
According to Beck, bakeries, the ceramics and glass industry, paper manufacturers and the transport and logistics sector are particularly threatened by the energy crisis. “But the trades as well as gastronomy, beverage production, hairdressing salons and gardeners and landscapers are likely to be affected.”
The order situation at Kärlicher Ton- und Schamottewerke is good at the moment, but boss Mannheim is still worried. So far, he has only bought 60 percent of the gas he needs for 2023. And electricity prices have already given him problems this year.
“We monitor the energy markets and continue to fulfill our orders,” he says. “But we have to see whether we and our customers can sustain the high prices over the long term.”
Some companies are already facing tough decisions because of the tense situation. A survey by DZ Bank of more than a thousand managing directors revealed that many medium-sized companies have to initiate drastic changes.
According to this, every fourth company is facing restructuring, and every fifth company in the food industry is considering layoffs. Mannheim can also imagine shutting down individual KTS systems, at least temporarily, should electricity and gas costs remain as high as they are at the moment.
However, he wants to keep the 27 employees currently employed by KTS. When push comes to shove, employees are sent on short-time work, he says. “But I don’t want to think about that at the moment.”
Despite all the gloomy news, economist Beck believes that medium-sized companies have the potential to avoid bankruptcies caused by energy prices. Not only austerity measures, but also “product and process innovations” could be a way out of the crisis.
“Perhaps also adjustments in the product range, for example a narrower range. Maybe a baker doesn’t necessarily have to offer strawberry tarts in winter,” he says.
And adds: “Unfortunately, if possible, relocating production abroad is also one of the possible strategies.” Electricity and gas price brakes, i.e. regulations that are to be adopted by politicians in the next few days, could also help.
The gas price brake, which should take effect from March at the latest, provides for basic consumption subsidized by the state, as does the electricity price brake. This should apply from January.
Expert Beck believes that such measures can provide relief in the short term. But he also says: “You always have to remember that this money will have to be paid back one day, and that will ultimately only work through taxes.”
It is also unclear whether the state aid would come in time. Many companies already have their backs to the wall, see Eschenbach Porzellan.
In any case, KTS Managing Director Mannheim has created a whole list of proposals for politics. They are ideas on how to deal with the energy crisis and how to reduce gas and electricity prices.
For example, he is in favor of keeping all functioning nuclear power plants connected to the grid, at least until 2024. “This way we can produce as much electricity as possible and have more planning security,” he says.
“I would like to see measures that are free of ideology, in my opinion coal cannot be the solution.” The company boss also thinks it makes sense to reduce taxes on individual forms of energy to the minimum permissible under European law.
Apart from that, the CO2 tax on fossil fuels introduced in 2021, which is intended to reduce consumption through inflation, should be suspended for at least two years in Mannheim’s eyes. His reasoning: Energy has become significantly more expensive even without them.
Ultimately, Mannheim does not believe that his company will have to close in the coming year, even if times are difficult. After all, KTS is in so many products, he emphasizes. “We are needed. Even if we have to downsize at times, I think we can manage it somehow.”
