What is the reason for the increase in steel prices in the UK in recent weeks?
How much has the price of industrial electricity increased in the UK?
How have Russian sanctions affected energy prices in Europe?
What has the UK done in recent weeks to provide its energy needs?
Sharp rises in electricity prices in the UK has forced steel companies to increase their prices by 70%.
Rising Prices of Steel Products in the UK
Steel boss James Brand announced that his customers in various sectors, including oil, gas, automotive and construction, continue to place new orders at unprecedented prices. His number of orders has increased from the usual 4-6 weeks to 6 months. The reason for this is that customers predict the price of steel products in the UK will rise even more following the sharp rise in the price of raw iron and scrap metal due to the Ukraine war. Also, the energy required to melt the two inputs needed to make cast iron has never been so expensive.
The Crisis of British Steelmakers
James Brand added that the situation has become difficult, but that they are still in competition despite the very small profit margin. Similar problems apply to steel companies and other industrial companies across Europe due to rising electricity prices, supply pressures, persistent disruptions caused by the Covid-19 pandemic and Russia’s invasion of Ukraine – two countries which are both major producers of crude iron.
UK Government Strategy to Resolve the Energy Crisis
The situation is especially acute in the UK. The steel industry is facing electricity prices which are 50-60% higher than similar prices in Germany and France due to environmental policies. This is especially true for companies like UCB, which needs more electricity and gas for steel. James Brand is worried that his prices will eventually reach a point where customers can no longer afford them and that demand for his company’s products will drop. The UK Government has acknowledged that the country’s steel industry is facing higher energy costs than its European counterparts. In a new energy strategy, the government announced this month that it would extend the compensation plan for high-consumption users for another three years, a move that has been welcomed by the industry and has been accepted as a step to help bridge the electricity price gap.
Rising Energy Prices in Europe Following Russian Sanctions
Sanctions against Russia, the world’s largest exporter of fossil fuels, have pushed up energy prices in Europe and fuelled the British crisis. This has also led to sharp rises in energy prices in Europe, with about 80 million households in the UK alone expecting a 50% increase in their household fuel bills this month. Some experts look at the current situation with concern, likening it to the energy crisis of the 1970s. At that time, the shortage of fuel greatly affected everyone worldwide.
UK Looking for New Sources of Energy
PM Boris Johnson is desperately looking for new energy sources. He has promised to build a new nuclear power plant every year and eight nuclear power plants over eight years. “This is about tackling the mistakes of the past and making sure that we are set well for the future,” Johnson said. He said it would ensure the UK was “never again subject to the vagaries of the global oil and gas prices, and we can’t be subject to blackmail, as it were, from people such as [Russian President] Vladimir Putin.” “Very large shock to their real income and spending” said Andrew Bailey, the governor of the Bank of England. The shock to energy prices will be much broader this year than it was in the 1970s.
Possibility of Energy Distribution Quotas Among the British
In 1973, the Arab-Israeli war led to the imposition of oil sanctions by OPEC members. These sanctions led to a shortage of fuel on the market and ultimately to a global recession. It was then that the world suddenly realised how dependent it was on Middle East oil and OPEC to supply the energy it needed. At that time, the UK faced severe inflation and an unprecedented rise in prices. Almost like the situation we see in inflation rates today. In those years, the UK Government required citizens to heat only one room in the winter. A similar proposal is currently being made to British citizens. To solve the problem, the British Labour Party has proposed that the distribution of energy among the citizens of this country be rationed during the current crisis. Of course, the proposal has not received much attention, but Boris Johnson offered his own way out of the crisis with a 54% rise in electricity prices in early April.
The Main Reasons for the Electricity Crisis in the UK
Inflation in the UK is now at its highest level in 30 years. Experts also say that hundreds of thousands of households will be below the poverty line. The Resolution Foundation said that the current situation will bring 1.3 million people below the poverty line, of which 500,000 are children, and this is the first time that poverty in the UK is so widespread. Among the main reasons for the electricity crisis and sharp rises in the UK is the strong dependence of electricity on imported natural gas, as well as some other natural limitations such as low wind speeds most days of the year. Although the British have moved to renewable energy sources, such as solar and nuclear power in recent decades, realising the need to shift energy sources, some 40% of the country’s electricity is still generated by natural gas.
Setting Up Old Coal Plants to Generate Electricity
The problem of rising prices for imported natural gas has challenged the UK electricity industry to such an extent that the country’s electricity authorities have been forced to set up one of their oldest coal-fired power plants to generate electricity, despite awareness of high coal emissions. Earlier, British power industry executives had promised to shut down all coal-fired power plants by October 2024; these previously had a 2% share of UK electricity generation, but this figure is expected to increase in the coming years.
A significant portion of the gas needed to generate electricity in the UK depends on the amount of natural gas imports from Russia, specifically Gazprom. The Ukraine war has created a serious rift between Russia and European countries. Hence, not only have the UK electricity challenges not diminished, they have increased. This has a direct impact on rising energy prices, specifically electricity, in this country. According to experts, it is one of the most important factors in rising inflation and higher prices.