Food sector vulnerable due to dependence on natural gas

The Dutch food industry remains sensitive to fluctuations in the energy market. The war with Iran once again highlights how heavily the sector relies on fossil energy. This dependence continues to affect costs, investments, and the pace of sustainability efforts.

Cost increases mainly visible in transport

The impact of the current tensions is partly cushioned in the short term. Many companies have hedged their energy prices through long-term contracts. As a result, direct cost increases remain limited for now.

The greatest pressure is currently in transport. Costs for road transport, containers, and air freight are rising. Even if the conflict ends quickly, energy prices are expected to remain elevated for a longer period. Damage to production and transport infrastructure plays a role in this. Once energy contracts expire later this year, companies will still face higher prices.

Energy savings lag behind

Since the energy crisis of 2022, energy consumption has decreased by 5.5 percent. That is significantly lower than the average decline in the Netherlands of 11 percent. Adjusted for lower production, the savings amount to just 3 percent.

Natural gas remains the main energy source at around 70 percent. Gas consumption decreased by 8 percent, while electricity consumption increased by 12 percent.

Companies that invested in electrification earlier currently have an advantage. Electricity prices are relatively lower than gas prices. This is because the link between the two has weakened compared to the energy crisis of 2022.

Sustainability efforts face limitations

The transition to alternatives is progressing slowly. Many production processes require high temperatures, often above 100 degrees. These are difficult to electrify. Hydrogen may be a technical solution, but it is not economically viable.

For processes with lower temperatures, alternatives such as geothermal energy and residual heat are possible. However, availability is limited and location-dependent. Electrification via e-boilers or heat pumps also requires significant additional capacity, while grid congestion restricts expansion.

The financing structure also slows down investment. Companies replace installations only once every 10 to 20 years. Sustainable options often have longer payback periods, while supply contracts are typically short-term. As a result, many companies remain dependent on natural gas for the time being.

Abnamro.nl