The International Energy Agency has issued a report projected a drop in global electricity demand this year, especially in Europe, where demand is seen falling for a second consecutive year to a two-decade low.

The agency expects electricity demand in the EU to drop by 3 percent in 2023, the rate at which it had also fallen in 2022.

IEA’s anticipated electricity demand reduction for the EU indicates Europe’s energy-intensive industries have yet to make a recovery following last year’s drop in production levels, as highlighted by a 6 percent slump in the EU’s overall electricity demand during the first half of 2023.

The IEA report notes that a drop in high-voltage industrial electricity demand, not milder weather conditions, is the main factor behind the EU’s reduction in power demand.

Many industrial producers reduced or stopped production in 2022, the IEA report noted. Primary aluminium (-12%), crude steel (-10%), paper (-6%) and chemicals (-5%) were among the energy-intensive sectors that significantly reduced production in 2022 due to plant closures and production cuts, according to the IEA report.

Declining domestic chemical production led to Europe becoming a net importer of chemicals in 2022, as key industry players such as BASF and OCI reduced production in the region.

The fertilizer industry is also experiencing a sharp decline with major European producers such as Yara and Grupa Azoty cutting back production of ammonia, urea, nitrates and NPK (nitrogen, phosphorus and potassium) fertilizers.

Steel production in Europe has fallen significantly as companies such as ArcelorMittal have temporarily closed furnaces in France, Poland, Spain and Germany.

Aluminium producers have been severely affected by increased electricity prices given the industry’s electricity intensity, with several companies such as Speira GmbH and Alro reducing production.