Czech industrial companies have fallen into the trap of expensive energy and their products are already losing competitiveness on the world market.
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“The Americans told me straight away that I could not get a business like this. That they have gas for $ 11, so what do we do when it’s around $ 140, “describes the owner of Brano Group Pavel Juříček. His company manufactures door locks, lifting equipment and shock absorbers and is one of the world’s largest suppliers in the automotive industry. Last year, it had sales of 6.6 billion crowns and a pre-tax profit of 400 million. Now it is operationally in the red, because high costs cannot be passed on to customers.
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“We are pulling it out, we cannot cut the partnership we built 25 to 30 years ago,” adds Juříček, adding that when the government threw companies overboard, it was looking for another way.
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“As entrepreneurs, we find our own solutions. Regardless of existing prices and existing market. We have preliminary agreements on deliveries outside Europe, “says Juříček.
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Possible, legal… and cheaper
According to economic expert Jiří Gavor from ENA, such a path is possible and legal. “It’s about having a salesman doing scouting and looking for activities in a foreign market. Conclude a business contract with him and arrange a business trip. If a trader has a contract, there is nothing to prevent him from concluding contracts, for example, for individual companies, ”explains Gavor.
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Pavel Juříček does not want to say where the gas will come from, he just says that this price is much more financially favorable than in the Czech Republic.
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“We have found cheaper gas sources and better prices than what runs through Nord Stream and Germany. We found the pipes that would pass through, there are also control stations and we will get gas to the Czech Republic in our own way. We have nothing else left, “says Juříček, adding that he will use the existing pipeline in this event.
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There is more variant
A possible option is to take gas, for example, from Azerbaijan via Italy, which imports gas from here, but also from Russia. In such a case, however, there would be a need for cooperation between the two countries and there would have to be a so-called “swap trade” – gas from Russia would remain with us and gas from Azerbaijan, for which Czech companies would pay, would remain in Italy. However, the purchase of LNG seems to be far more likely for energy experts.
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“Given that Mr. Juříček deals with the USA, I would speculate that he is trying to negotiate the supply of LNG through his contacts. But it doesn’t matter where the gas comes from. If he talks to large importers who have shares in LNG terminals and have available capacities, you can make a deal with them like this, “explains Michal Kocůrek, EGÚ Brno’s managing consultant, noting that the capacity of LNG terminals in Europe available, is not fully utilized today, although it needs to be fully reserved.
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According to Jiří Gavor, another possible way is the import of LNG from Australia. “I have already confirmed at the moment that some Czech traders are actively operating in Australia, where they want to buy cargo LNG supplies. It loads it on a tanker and then it can be imported to Croatia or Germany, ”adds Gavor.
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Map of gas pipelines in Europe
According to experts, the price may be really lower than in the Czech Republic. “I will speculate now, but no one will offer gas below cost. So if we look at the level of costs in the US, for example, we would add other necessary fees – liquefaction, transportation, distribution and more, so we get to the value of about 40 euros per megawatt-hour. That’s the limit, and if something like that really works, it’s very tempting. But I’m afraid it won’t be this bottom. But it will definitely not be 120 euros, which we now see on the market, or 90 euros, which we got used to in May, “adds Kocůrek.
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“No matter who is involved, the producer is a trader who will know the prices in the European market. Or it will also depend on the length of the contract, “adds Gavor.
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Cheap gas by the end of the year?
“New” gas could flow into Czech companies at the end of the year. “It would be a solution for the industry and anyone who joins it. Now we find out who has how it is fixed, who is on the spot and so on. In short, what capacity do we need, “adds Juříček, according to whom twenty domestic companies are currently interested in cheap gas.
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Antonín Růžička, the head of Wikov Industry, is one of those who was interested in the offer. “I would like to join in. Unfortunately, shortly before I found out about this possibility, we concluded a contract for gas supplies for a year, “says Růžička, noting that the prices are attractive, and will therefore join in 2023.
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Another who is considering this is Juta owner Jiří Hlavatý. However, the price of electricity is much more important than gas for his company in particular. “It simply came to our notice then. We have 70 percent secured for 2023, and if we did, the hedging would be canceled. But gas consumption is only 10 percent against electricity, and it is literally killing us. Today, a megawatt hour is worth 254 euros, ie 500 percent more than last year, “adds Hlavatý.
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According to him, Vlastislav Bříza from the Koh-i-Noor holding would also like to join. According to him, entrepreneurs have to take care of themselves if the government has not done so.
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Volumes are calculated
It is the capacities of individual companies that are key now. “We could import gas now, but now the ball is on our side as we, as entrepreneurs, put the volumes together. It’s not just millions of cubic meters of gas. We work on it and we get together who needs how much and since when, how much we put together in each year, “adds Juříček. At a recent meeting with businessmen, he said he had up to two billion cubic meters of gas reserved.
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Entrepreneurs now have a big concern from the beginning of next year. “There is no fear that there will not be enough gas. The Russian side has already said that it will reduce supplies by 11 percent from next year. And the Czech Republic is only at the end of the branch, “adds Juříček.
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/data/photo/2022/06/17/62ac2d31317b2.jpg "Irfan Hakim and Tanboy Kuy reconcile after the One Chip Challenge Tragedy")