UK steel industry calls for reduced electricity costs to match European competitors

The UK steel federation, UK Steel, published on Sept. 2 a report highlighting the sizable disparity in electricity prices between UK steelmakers and their European counterparts and called on the UK's new government to take the opportunity to reduce it and sustain the steel industry.

The report reveals that UK producers pay up to 50% more than those in France and Germany, costing the industry an additional GBP37 million. With the steel sector's shift towards electric arc furnaces that are highly electricity-intensive, these costs are increasingly critical for competitiveness as it expected that the sector’s electricity consumption will roughly double. Currently, the UK steel industry’s electricity use is equivalent to 800,000 homes.

UK Steel proposes three key recommendations to address this issue: compensating industries for 90% of network charges, monitoring energy price differences across countries and reforming wholesale markets. In particular according to UK Steel, the main driver of the price disparity is now wholesale electricity costs, driven by the UK’s reliance on natural gas power generation.

According to the association the previous government introduced a 60% compensation for network charges, which is lower than the 90% offered by Germany and France, leaving the industry facing network charges up to10 times that of their European counterparts. UK steel called on the new government to increase this to 90% and bring network charges in line with European competitors.

“This new government has already set out its willingness to deliver for the steel industry, and it now has the opportunity to bring industrial electricity prices in line with our competitors,” UK Steel Director General, Gareth Stace said underlining how the average price faced by UK steelmakers for 2024/25 is GBP66/MWh compared with the French price of GBP43/MWh and Germany's GBP50/MWh, making a total price gap of up to GBP22/MWh.

“Steel is integral to the new government’s ambitions for the UK, from the renewable energy rollout through GB Energy to infrastructure developments and increased housebuilding, which all require and rely on steel. Lower power prices are crucial to unlocking the success of the UK Steel industry, enabling steel to be the backbone of a strong and thriving British economy,” he explained.

The UK steel sector produces 5.6 MMt/y of crude steel, around 70% of the UK’s annual requirement (annual demand of 7.6 MMt in 2023). In UK Tata Steel and British steel, respectively the largest and second largest steel producers, are switching their production from blast furnace to EAFs.

Platts, part of S&P Global Commodity Insights, assessed UK HRC at GBP560/mt on DDP West Midlands basis on Aug. 29, down GBP10 on the week.