UK Steel Industry in Crisis Amid Soaring Electricity Costs

The UK steel industry is struggling with challenges due to the soaring electricity costs, threatening its competitiveness and long-term viability. According to UK Steel, the country’s steelmakers are struggling with electricity costs that are up to 50% higher than those in Germany and France. This notable price gap, amounting to approximately £22 per megawatt-hour, is eroding profitability and discouraging investment in the sector, reported Pinnacle Gazette.

UK producers have incurred additional costs amounting to £807 million compared to French producers and £697 million more than German steelmakers since 2016. The newly formed Steel Industry Council has noticed the current situation and is responsible for tackling these urgent challenges.

Gareth Stace, CEO of UK Steel, has expressed concerns, stating the industry is now as unstable as it was during the 2016 crisis when many smaller companies had to close down due to falling prices.

The increase in electricity rates is attributed to several factors, such as elevated wholesale prices, grid connection fees, and the reliance on natural gas for energy. 

UK Steel has stressed the urgency of government intervention to curb rising costs, particularly as the steel industry transitions toward electric arc furnaces to achieve emissions reduction targets. This shift, albeit necessary for sustainability, poses additional financial strain if not properly addressed.

Stace has warned of the forthcoming challenges projected for 2025, with the government planning to introduce local electricity pricing zones, which may inadvertently burden steel manufacturers even more. “The combination of these factors looks bad for the sector when it comes to attracting investment,” he stated, highlighting the unstable state of the industry.

UK Steel is advocating for several measures to ease the financial pressures on producers. The association demands increased compensation for network costs to 90%, aligning these with levels experienced by their European peers. 

Some proposed measures are the reforming of the UK wholesale electricity market, while possibly implementing a system akin to the French ARENH tariff,  allowing regulated access to existing nuclear power. UK Steel also calls for the abandonment of the current local pricing model as it could disadvantage domestic steel producers. 

The significance of the steel sector to national priorities cannot be overstated. Steel plays a core role not just in the economy but also within key government initiatives such as renewable energy projects, infrastructure expansion, and national defense capabilities.

Hence, the government formed the Steel Industry Council earlier this year to offer advice on recovery strategies and develop future plans for the sector’s revival.

Despite the council’s formation, the experts stress the need for immediate and effective interventions to ensure the sector’s long-term viability. Rising energy costs threaten to erode any progress made through strategic support, potentially undermining investments and jeopardizing operational sustainability across the industry.

Share this post

Upcoming event

SSG Logo
Early Bird Tickets Available

2nd World Green Steel, Hydrogen and Energy Summit

Brussels,
Belgium
April 2025