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Czechia is one of the most industrialized countries in Europe and our economy is energy intensive. This is currently unbearable and many companies will not survive or have not survived. The problem is above all the glassworks, which use almost exclusively natural gas to heat their ovens, but also paper mills, ironworks, manufacturers of building materials and bakeries. They shut down production, look for another source of energy or raise prices.
High energy prices will be with us for a long time. After all, many people have already warned about rising energy prices due to switching to more environmentally friendly sources. But everyone had only a vague idea. Less than a year ago, for example, the adviser of the Czech National Bank, Oldřich Dědek, confirmed to me that the central bank is dealing with inflation due to the influence of green policy, but at the same time he indicated that he did not still know a lot about it.
The war in Ukraine has only accelerated the lack of energy and cheap fossil resources. Now the entire ecosystem of domestic companies is bleeding. It is experiencing a massive outflow of money and many companies are making money pretty much on energy alone. Česká spořitelna’s chief economist described it well David Navratil: “While three years ago we paid around 3 per cent of GDP for the import of oil, gas and coal, at today’s prices we would already be paying around 15 per cent of GDP.”
However, this huge shock, which forces companies and households to limit their energy consumption, mainly natural gas and electricity, has other consequences for the economy. They are not visible at first sight.
V. conversation with Zuzana Hodková, for example, the owner of Kofola, Jannis Samaras, hinted at them. “High energy prices are forcing companies to stop ammonia production, especially for fertilizers. Food CO2 and dry ice are also important by-products. Now there is a shortage, hence the price in Belgium. for example, it jumped from € 250 to € 1,300 per tonne. Some large breweries and beverage companies are forced to reduce or completely stop production due to a lack of CO2, “says Samaras.
However, it’s not just the food industry. The problem also extends to agriculture or the auto industry, which is shifting to the production of electric cars.
This illustrates the problem with sulfuric acid well. More than 80 percent of the world’s sulfur production comes as a “waste product” from the processing and refining of fossil fuels such as oil and natural gas.
However, the supply of sulfuric acid, which is produced from sulfur, with the limitation of the extraction and consumption of fossil fuels (in order to slow down climate change) will reduce just at a time when demand is growing.
The most important use of sulfuric acid is in industrial chemistry, where a wide variety of materials decompose. Draslovka from Cologne knows the problem very well, as it has been greatly affected by high gas prices and a lack of ammonia.
“Much of the metals needed for the transformation of society to the next level, electromobility or the storage of electricity and the information revolution, are extracted precisely with the help of sulfuric acid (acid leaching). If we limit the ‘ extraction of fossil fuels from which it is produced, will lack 70 to 80% of the sulfur used for the production of sulfuric acid “, describes the situation Pavel Brůžek, head of the chemical company Draslovka.
On the one hand, there is a huge push to extract more metals such as nickel, cobalt, copper or gold, which are used in the “new” industries. On the other hand, for this we need significantly more sulfuric acid, which is a by-product of refining and cleaning during the extraction of fossil fuels. The price then continues will grow.
The world today consumes more than 246 million tons of sulfuric acid per year. The rapid growth of the ecological economy and intensive agriculture could lead to an increase in demand to over 400 million tons by 2040.
Who will be able to pay a higher price for the raw material? Car companies that produce electric cars and batteries, or farmers from third world countries? I’d rather guess the first ones.
I have tried to show that inflation will be with us for a long time. Companies in the Czech Republic will continue to struggle for survival and transformation in the coming years. But what will the new economy be that will create high-paying jobs in the Czech Republic? It will definitely remain an industry that has the original product and high margins. An example is the aforementioned Draslovka, which can produce chemicals more efficiently than its competitors, and also transfers part of its production to its plant in the United States.
But who will replace the endangered part of the sector, or the low-margin subcontractors who will not be able in the future high input prices to absorb? Will they be service companies? But who will we supply them to when people lose their jobs? Are we ready to offer services in new IT sectors abroad? How many new Avasts can be born in the Czech Republic?
The Czechs undoubtedly have ideas, but they don’t have the venture capital to back up the ideas at an early stage. Banks finance only with real guarantees, which young companies do not have, or they finance projects at an advanced stage.
Some hope lies in the fact that the Czech economy is among the most sophisticated in the world in terms of complexity. IN indexech economic complexity (ECI) and product complexity (PCI) occupy the highest ranks in the world. The new ideas will therefore not be generated by the relatively underdeveloped IT services sector, but rather sophisticated robotic engineering and machine manufacturing related to the electrotechnical or automotive industry.
After a decade of near-zero interest rates, which has caused a real estate fever in the Czech Republic, a craze for worthless digital coins traded via blockchain, or a giant bubble in the market with unregulated corporate bonds, a lull is coming. pressure of the crisis. Time for real innovations and useful ideas.
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