In times of crisis, it’s often hard to find a positive. And that could have been the case when an international conflict completely derailed the costs and accessibility of energy sources used by Monument Chemical Kallo. But instead of accepting the new reality, the Kallo team had already pro-actively chosen to seek opportunity, turning the circumstances into a chance to elevate their energy usage management and implement new initiatives to reduce their long-term impact — on every level.

“In the past, energy procurement, recovery, and consumption were less coordinated over various departments” Christophe Vergote, Supply Chain and Procurement Manager at Monument Kallo, explained. “But throughout the last few years, we have made efficient energy management a priority at every level of the business, across every department. So when energy costs soared as a result of the Russia/Ukraine conflict, it was a full team effort to proactively dissect our energy management and uncover initiatives to drive down costs.”

The first step was creating full transparency into the current processes.

“We needed to gather all the facts for our sales and management teams,” Christophe shared. “So we analyzed what products are using how much energy; as well direct as indirect energy consumption. Based on that data, we created an excel-tool that provides insight in the total energy usage per ton produced. The tool covers as well steam & gas consumption in megawatt hour (MWh) of our direct usage and indirect usage (i.e., gas for heating tanks, cleaning, losses, etc.), as well as one for the electricity consumption. We made energy pricing a variable to allow commercial to play around with market prices and instantly see the net impact per ton depending on the pricing formula in their sales contract.

By tweaking these pricing formulas in our contracts with major customers, our commercial team has ensured that our pricing covers at least the full energy costs that we are incurring for each ton produced.

Besides tweaking the energy component in our total pricing, the sales team also addressed the timing delays that were active in certain contracts and brought them much closer to the indices at which we are buying the gas / steam. In highly volatile markets as we see today, pricing delays have significant impact on our margins.

“When the markets weren’t so volatile, it didn’t really make a difference if pricing from one quarter was used in the next,” Christophe explained. “But in a more transient market, delayed indices are having a significant impact on our margins. Our primary goal was to have sales prices cover for actual energy costs, even when volatile and to protect our margin.

On the procurement side, we have renegotiated the contract for delivery of high-pressure steam (Ecluse) to be more competitive in a changing market situation. Steam is being delivered as an alternative energy source to natural gas and is delivered through a pipeline network in the local area. Per today, we have significantly reduced the steam costs to always be a competitive alternative to natural gas.

Another big win is that we are very actively managing the energy source based on spot market fluctuations. This means we are switching between gas and steam as a source actively to make sure we optimize cost to opt for the source with the lower cost.

The payoff is already clear. Looking at just gas and steam, historical prices have typically been around 15-20 Euro per MWH, but jumped to an average of 123 Euro in 2022 due to the global supply circumstances. Based on a consumption of 200,000 MWH per year, this means an additional 20 million Euro on energy cost.

“Thanks to our overarching team approach, we saw opportunity in the crisis and turned what could have potentially been a major net loss into a net gain for Monument over the last year,” Christophe added.

The real strength in these efforts came from the diversity of the team behind it: Process Technology, Commercial, Production, Finance and Procurement. All of these departments (and at all levels, from site employees to senior leadership) had a hand in the creation and execution of each of these initiatives with additional ones in the queue to continue reducing energy costs.

“We really took a 360-degree approach to this in order to create full awareness and visibility into our energy consumption and the areas for improvement,” Manu Gyselinck, Site Manager, added. “The tool we created has given everyone better insight into our overall costs and output. And on the operations side, these efforts have prioritized energy and made it a strategic point in every discussion we have. With such a high level of involvement, we have also increased our implementation speed as well.

“We have already started working through a number of initiatives and have a list of approved capital projects that we can implement this upcoming year to build on progress. All of these wins are a major achievement for us, and there is a lot more to come!”