UK Steel warns updated government energy support puts producers at global disadvantage

UK Steel has warned that government’s latest energy support scheme will put UK steel producers at a significant global disadvantage, in a statement released Jan. 9.

The government announced Jan. 9 that energy intensive industries including producers of steel and other metals will receive a higher level of support under an updated Energy Bill Relief Scheme, or EBRS, with maximum discounts of GBP40/MWh for gas and GBP89/MWh for electricity on thresholds of GBP99/MWh for gas and GBP185/MWh for power.

The current EBRS was introduced by the UK government on Sept. 21 and capped industrial electricity prices at GBP211/MWh and gas prices at GBP75/MWh between Oct. 1, 2022 and March 31, 2023.

While welcoming the certainty and stability provided by the extended government support, UK Steel warned that the scheme falls short of those introduced across its key global competitors and said that the new measures do not afford adequate protection in instances of heightened market volatility.

UK Steel noted that the German government guarantees an electricity price of Eur130/MWh for the whole of 2023, giving its steel industry a significant advantage over UK producers.

“The reformed EBRS provides a discount for electricity prices above GBP185/MWh, leaving UK steel producers paying an estimated 63% more for power than German steel producers this year,” said UK Steel.

“This situation will maintain a long-standing competitive disadvantage for UK producers, resulting in higher production costs and a reduced ability to compete this year,” it added.

The association called on the government to address the higher costs UK steel producers face relative to their competitors.

“Given the disparity in relief provided in the UK and competitor countries, it is essential that the government now delivers on its Energy Security Strategy and addresses the outstanding disproportionate costs UK steel producers face in electricity bills, including high renewable levies and network costs,” it said.

Platts, part of S&P Global Commodity Insights, assessed the weekly UK hot-rolled coil price at GBP620/mt ($755/mt) DDP West Midlands Jan. 5, down 49.4% from the all-time high of GBP1,225/mt on April 22.

Northwest Europe HRC was assessed at Eur720/mt ($772/mt) ex-works Ruhr on Jan. 9, down 51% from a high of Eur1,460/mt assessed on March 22, 2022.

— Euan Sadden