Steel industry calls for price cap - British producers seek support to cope with Trump tariffs
The British steel industry has called for energy prices to be limited to compete with France and Germany, as companies face the fallout from the Trump administration's trade war.
UK Steel, a lobby group, has proposed to the government to set a maximum price for energy through a contract for difference, ahead of an announcement of a new steel strategy. Britain’s steelmakers and other industrial energy users have long stressed that high energy prices were the main factor hurting UK operations.
UK Steel figures suggest producers face costs up to 50% higher than those in France and Germany, although analysis by consultancy firm Baringa said UK companies will pay around £68 per megawatt hour (MWh) for electricity this year, compared with £44 in France and £52 in Germany.
The UK steel industry is lobbying for help as it battles a global oversupply, particularly from China, and the impact of Trump's trade war. The US president has imposed a 25% tariff on steel and aluminium producers to force companies to produce in the United States.
Among the factors that have pushed up prices in Britain are heavy support for gas-fired power generation, limited use of undersea cables that would supply cheaper foreign energy, and lower subsidies than rivals.
Under a contract for difference, the government would pay energy-intensive industrial users the difference if prices rose above a certain level, while companies would pay the difference if prices fell below it.
Industry argued that the mechanism would provide clarity and make it easier for companies to invest in the UK. However, it is unclear whether the government would support a policy that could see it bear huge costs if global gas market prices rise. Labour also promised in its election manifesto to reduce the cost of industrial electricity.
The UK government has a £2.5bn fund to invest in the steel industry, a promise that has so far survived plans for big cuts elsewhere in the budget. The fund was set up as a way to reduce the industry's emissions. Some steelmakers in Britain are insisting that the government impose tariffs to protect them from the impact of Trump's tariffs.
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