British Steel today warned that the gas price crisis facing the country was heading “out of control” after seeing its energy costs rise fifty-fold this year.
The steel group, which is the UK’s second-largest producer after Tata Steel, said it was paying GBP2,500 per Mwh for power currently compared with GBP50 per Mwh in April and such a steep rise was making it impossible to produce commercially.
“With winter approaching, when demand will rise, prices could get significantly worse,” the company told reporters, adding that while production was running normally at the moment the recent costs rises could not be absorbed.
Normally electricity accounts for 20% of the steel production process, said UK steel, the industry’s trade body, but recent prices had skewed the costs of the whole process and made it uneconomic.
“Electricity is a huge part of their costs and can even be higher than the wages bill,” the trade body said.
Earlier, Business Secretary Kwasi Kwarteng said that while the current crisis is challenging, the recent gas price rises would prove temporary.
British Steel called for green levies on electricity to be suspended, something that energy suppliers urged the government in a meeting yesterday.
One bit of comfort for the producers is that due to some of the issues causing gas prices to spike, such as supply chain disruption, steel prices are also at record highs.