Electricity prices have risen to over £1,500/MWh this week, over 30 times the historical average, forcing some steelmakers to cease production temporarily.
The government is expected to announce soon what further support it will provide to industry in the face of spiralling energy costs once the current Energy Bill Relief Scheme (EBRS) ends in March.
UK Steel is asking the government to confirm an extension and improvement of the EBRS for energy intensive industries providing certainty that the steel industry can operate competitively in the year ahead.
Commenting on the energy prices, director general of UK Steel, Gareth Stace, said: “Massive electricity price spikes this week have all but broken the Energy Bill Relief Scheme, which aims to shield industry from sustained unsustainable price levels. 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.
“The steel sector is looking to the Government to announce that it will continue to cap electricity and gas prices for vulnerable sectors, such as steelmakers, when it publishes its review of the EBRS, expected before the end of the year. Critically the price cap must be updated to reflect new market conditions and actions being taken in competitor countries.
"The German Government is already planning a scheme for all of 2023, where it will guarantee wholesale electricity prices at €130/MWh, well below the UK’s cap of £211/MWh. The UK Government should match this to ensure our industry’s ability to compete.
“Without the continuation of the EBRS, our estimates show electricity prices being double those of 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.
“The Government must extend the support scheme, otherwise the UK steel sector will be wholly exposed to ravages of volatile energy markets with predictably grim consequences.”
