Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

British steel producers paid significantly higher electricity costs compared with major peers in the European Union in 2020, according to a report published by local steel trade association UK Steel on Feb 4.


At £47/MWh, UK’s steel producers, on average, paid 86pc and 62pc more than their German and French counterparts, respectively. The report noted that German steel producers paid an average of £25/MWh and French paid £28/MWh.


According to the report, the price disparities revealed by the research equate to a total additional cost of around £54 million per year for UK steel producers compared to those in Germany. 


The UK Steel report claims that this type of cost disadvantage led to underinvestment by UK steelmakers and thus eroded their competitiveness in the international market.


UK Steel Director, Gareth Stace, commented that UK steelmakers faced “systemic disadvantages in higher electricity prices” than their competitors since electricity was one of the biggest costs for the steel industry. 


The report touts this cost disparity as a barrier to meeting the country’s “Net Zero” target, given that all options for decarbonizing steel production (Carbon Capture and Storage (CCS), hydrogen, and electric arc furnaces) lead to “significantly increased electricity consumption.”


Through the report, the association put forward six easily implemented measures to the UK government to benefit the British steel sector: 


  • Implement German/French style network cost reductions;
  1. Increase the level of renewable levy exemptions;
  2. Provide 100pc compensation for the Carbon Price Support’s indirect costs;
  3. Provide an exemption from Capacity Market costs;
  4. Link UK ETS to the EU ETS and compensation for indirect costs; and
  5. Track industrial energy price disparities between countries.

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