Electricity energy costs damaging sector, says UK Steel

The "punishing" price of wholesale electricity is making it uneconomical to make steel at certain times, an industry body has said.

Director General of UK Steel Gareth Stace said wholesale prices had quadrupled to upwards of £1,000/MWh.

He said some companies were being forced to temporarily pause production when the price went "through the roof".

UK Steel said electricity costs accounted for up to 20% of the price of converting raw materials into steel.

"If you take a company like Celsa in Cardiff, they are using the equivalent of half the electricity in the city," Mr Stace said.

Celsa UK produces 1.2m tonnes of steel a year using an electric arc furnace.

Mr Stace called on the the UK government take action.

"It is essential that government take action to fix the structural weaknesses that lead to energy costs for UK producers outstripping European prices by a significant amount," he said.

But earlier on Monday, UK business secretary Kwasi Kwarteng said taxpayer should "not be expected to prop up companies which have poor business models and are not resilient to fluctuations in price."

His statement came as smaller energy providers battle to stay afloat due to gas price hikes making price promises to customers undeliverable.

Mr Stace said: "These punishingly high electricity prices are damaging the UK's steel sector and exacerbating the already damaging gulf between price paid by steelmakers in the UK and those in Europe, a gulf that UK Steel have been warning about for almost a decade.

"Electricity is a huge part of their costs and can even be higher than the wages bill," he said.

"For Tata Steel in Port Talbot, you have got a huge integrated steel plant which is carbon intensive, using a huge amount of electricity and gas....

"I'm not hearing it yet, but if this carries on, my fear is that layoffs could become a reality," he said.