German industry is significantly reducing energy consumption - financial expert explains the reasons and effects

German industry is significantly reducing energy consumption - financial expert explains the reasons and effects

According to a report by www.n-tv.de, German industry reduced its energy consumption by 9.1 percent in 2022 compared to 2021. This is primarily due to the sharp rise in energy prices. The chemical industry recorded the greatest demand for energy.

The decline in energy consumption in German industry due to sharp increases in prices is expected to have an impact on the market and the financial sector. The sharp increase in prices was mainly due to the Russian attack on Ukraine, which particularly affected energy-intensive industries. This led to production being significantly reduced over the course of 2022.

In total, 89 percent of the energy was used to generate electricity and heat, with 11 percent, mainly petroleum products and natural gas, being used as a raw material for the production of chemicals, fertilizers or plastics. Natural gas remained the most widely used energy source in industry despite a decline of 17.3 percent.

The chemical industry was once again the largest energy consumer with a share of 28.2 percent of total consumption, followed by metal production and processing with 22.6 percent and coking and mineral oil processing with 10.0 percent.

In order to reduce the burden on industrial electricity prices, the federal government has agreed on a price reduction that will apply for five years and will also benefit medium-sized businesses. Next year alone, relief of up to twelve billion euros will be achieved by, among other things, reducing the electricity tax to the European minimum for the economy.

These developments could lead to companies in energy-intensive industries reducing their production costs and possibly also adjusting their profit expectations. In addition, investments in alternative energy sources or energy efficient technologies could increase to further reduce energy consumption.

The decline in energy consumption in German industry could also have an impact on the stock market, especially on companies in the affected sectors. Investors and financial experts should keep an eye on developments and adapt their investment decisions accordingly.