Procurement markets
As a baseline scenario, we continue to expect hardly any physical bottlenecks on the procurement side for DB Group in the second half of 2024. Energy prices (natural gas and electricity) have decreased and settled at 2021 levels. The more favorable conditions for energy should now be reflected in production costs. However, high wage and collective bargaining agreements are having an opposite effect on production costs. Producer prices for 2024 are expected to drop by about 3% compared to the previous year. Overall, despite a decline compared to the previous year, the price level for products is expected to be significantly higher in 2024 than it was before the sharp increase in 2021.
At the beginning of June 2024, natural gas storage facilities in Germany were still about 73% full, and in the EU about 70% full, roughly the same as in the previous year. This indicates a less strained supply situation, which should in principle also be reflected in the spot and futures markets.
Overall, the situation on the energy markets is currently more relaxed than in the previous year. However, the market for both electricity and natural gas is at times still very unstable, which is reflected in more volatile prices over the course of 2024 so far.
On the electricity market, very low and sometimes even negative hourly prices often occur on the spot markets due to the strong expansion of wind farms and, in particular, photovoltaic systems as the intensity of the sun increases.This and the general reduction in the price level compared to the previous year have noticeably reduced spot prices compared to the previous year. Futures prices are also moving at a lower level than in 2023, although they reached their annual low to date in March 2024 and prices have risen sharply again since then.
The coal and nuclear power phase-out has led to a lasting reduction in the stabilizing reserves/buffer in the energy system. Depending on the weather and associated generation from photovoltaic plants and wind farms, electricity prices on the spot market are highly volatile not just from day to day, but even from hour to hour within the same day. Even in moderately complex weather conditions, prices have a high potential to go up or down.
It remains to be seen how energy prices (gas, electricity and oil) will develop in the further course of the Ukraine war, the war in the Gaza Strip or potential new geopolitical risks, but also in light of the further economic situation in Germany.