The impact of inflated energy prices for UK steelmakers was clearly emphasised in last week’s Steel 2020 report from an all-party group (APPG) of the UK parliament.  The report was chaired by opposition Labour party MPs Stephen Kinnock and Anna Turley (see Kallanish 23 January).

In a UK steel sector beset by problems caused principally by a clear lack of strategic government planning for decades, the main current problem is that of energy price policy, no puns intended. This topic took up pole position in the APPG report, researched by Leeds Business School’s Dr Ian Greenwood.

“That the UK’s industrial electricity prices are uncompetitive is well-known…” the report says. The most recent statistics published by Eurostat show that UK prices for extra-large users are 84% higher than the EU average (see Kallanish passim). This is bad enough, but it gets worse.

Research by the industry carried out in 2016 further illustrated the effect of this. “Taking into account all respective government interventions in the UK and Germany to specifically reduce industrial electricity prices, it was found on average that UK electric arc steel producers paid £17/MWh [... $21.4/MWh] (or 50%) more for their electricity than their German counterparts. This amounts to an additional cost of some £50 million/year for the UK steel sector.”

There are several reasons for the national price differential, spanning all elements of the electricity bill, including wholesale, network and climate change policy costs. “Electricity costs are, to a significant extent, the result of political and policy decisions,” the report adds. Because of some of these decisions, UK industrial and business users have had to bear a larger proportion of the costs of so-called decarbonisation policies.

The report highlights that the confusion in UK industrial energy ‘strategy’ is even illustrated by carbon pricing policy within the sector itself. The carbon tax/ton of CO2 for primary steel is £0.30 but for EAF recycling it is £8.00. This appears to illustrate an acute lack of understanding of how the sector operates, Kallanish notes. And, as the future of the UK sector will potentially rely more and more on electric melting, this remains something that requires urgent attention, the report adds.

“The German government has taken a more strategic approach, as part of its industrial strategy, by supporting and shielding certain key and foundation industries,” the document says.

That is where the major difference lies. UK governments of every political shade over recent decades appear never to have had any apparent industrial strategy for “… key and foundation industries” such as steel, Kallanish observes.