Steel production has been forced to halt temporarily this week due to the spiraling cost of energy.
UK Steel, the trade body for the sector, warned that production could decline further next year if the government does not extend and improve its support for businesses’ energy costs.
The current Energy Bill Relief Scheme is set to expire in March and an announcement is due in the coming weeks about what will follow. [emphasis, links added]
UK Steel director general Gareth Stace said:
“Electricity prices are at 30 times their historical average this week, forcing some steel companies to cease production at key times during the day.
“This is simply not sustainable for the steel sector. A long-term solution will be found in infrastructure investment and fundamental market reform, but in the interim, we need a bridging solution that ensures UK steel producers can make steel at the same cost as their European competitors.”
Steel prices in the UK soared during 2022, beginning at about £350 per tonne and peaking at more than £1,200 in April, prompting warnings from the likes of HS2 about the project risks brought about by material price inflation.
The cost of energy inputs during production is one of the main factors determining its sale price.
Stace noted that the German government’s support package for 2023 guarantees wholesale electricity prices at €130/MWh (£113), well below the UK’s current cap of £211/MWh.
“The UK government should match this to ensure our industry’s ability to compete,” he said.
“Without the continuation of the [scheme], our estimates show electricity prices being double those of the German industry’s next year, leading to reduced production, shrinking market share, and increased imports.
“Prolonged and frequent halts to production could become the norm, negatively impacting productivity and leading to a decline in steel production in the UK.”
Read rest at Construction News
The article is about financial measures to help the steel industry in the UK. That is not the problem. The basic cause is high energy costs. The root cause is moving from cheap fossil fuels to expensive renewable energy. The real solution is to reverse this process.
Krups stated last week they had 4 weeks of financial reserves , faces closure .