The UK steel industry is seeking high-energy energy prices to match France and Germany as businesses tackle the fallout from Donald Trump's trade war.
Lobby group UK Steel has proposed that the government set the maximum price of energy through a difference agreement (CFD) prior to the announcement of the new steel strategy.
British steelmakers and other industrial energy users have long united by naming high energy prices as a key factor that puts UK operations at a disadvantage.
While UK steel figures suggest producers are facing electricity costs up to 50% higher than the electricity costs of France and Germany, an analysis from consultant firm Baringa says that British companies will pay around £68 (MWH) for electricity this year.
The UK steel industry is seeking help to combat supply, the most notable, in supply, especially from the effects caused by the trade war between China and Trump. The US president on Wednesday imposed a 25% tariff on steel and aluminum producers, moving companies to force manufacturing in the United States.
“We've been working hard to get the most out of our business,” said Liam Bates, president of Long Products at Marcegaglia Stainless in Sheffield. You need to have good energy [supply]and competitive energy pricing. At this point, when there is a struggle, it will help. ”
The industry has denounced the UK's high prices for reliance on gas-fired power generation, limited use of subsea cables that allow access to cheaper foreign electricity, and relying on lower subsidies than rivals.
Under the CFD, the government pays the difference to energy-intensive industrial users if the price exceeds the set level, while the companies pay the difference if the price falls below that level. Setting prices at a similar level to France would cost 17p megawatts between 2026 and 2030, or £51m a year.
The industry argued that the mechanism would become clearer and would make it easier for businesses to invest in the UK. However, it is unclear whether the government will support a policy that could be liable for large costs if global gas market prices rise. Labour also pledged in its election manifesto to reduce industrial electricity costs.
Frank Ascoff, director of energy and climate change policy at UK Steel, said: The UK is an outlier as European competitors benefit from the government's wholesale pricing mechanism that protects them from high power prices. ”
The UK government has a £2.5 billion fund to invest in the steel industry. This is a pledge that has survived plans to cut sharply in other parts of the budget so far. The fund was established as a way to upgrade the industry for a transition to net zero steel, including switching from contaminated furnaces to cleaner electric furnaces.
Some top executives say it's better for governments to spend on lowering energy prices than directly betting on technology.
Some UK steelmakers hope that the government will impose “protective” tariffs to prevent the diversion of trade caused by Trump's taxation.
