The UK steel industry is facing numerous challenges due to a combination of high energy costs and trade barriers imposed by the US, notably President Trump's recent reinstatement of a 25% tariff on steel imports. These factors are placing considerable strain on the competitiveness and sustainability of UK steel producers.
This has led UK Steel, a lobby group, to propose the government put in place a plan to lower energy bills for the companies within this industry.
Impact of U.S. tariffs on UK steel exports
On March 12, 2025, President Donald Trump reinstated a 25% tariff on steel imports, affecting trading partners in the United Kingdom. This essentially means that a large amount of profit from steel companies is going to be wiped out by these tariffs, which has immediate and detrimental effects on UK steel exports to the U.S.
The U.S. is the UK's second-largest steel export market, accounting for 9% by value and 7% by volume. Major UK steel producers, such as Tata Steel and British Steel, have reported order cancellations from U.S. customers seeking to avoid the increased costs, leading to significant financial losses and operational disruptions.
High electricity costs undermining competitiveness
Alongside the challenges posed by international trade barriers are the high electricity prices faced by UK steelmakers compared to their European counterparts.
Reports have shown that UK steelmakers pay around £113 per megawatt-hour (MWh) for electricity, while their competitors in the EU pay £61/MWh. This £52/MWh difference results in the UK steel industry losing an additional £117 million annually, undermining profit margins and deterring investment.
The transition to electric arc furnace (EAF) technology, essential for decarbonising steel production, will further increase electricity consumption.
Due to this high cost, Steel UK has proposed that the government set a maximum price for energy through a contract for difference (CFD). This could reduce the financial pressures on UK steelmakers, allowing them to compete effectively in the global market.
Calls for government intervention
Additionally, there is a pressing need for the government to negotiate exemptions or alternative arrangements to mitigate the impact of U.S. tariffs on UK steel exports. Without such interventions, the UK steel industry risks losing critical market share, leading to potential job losses and further economic repercussions.
The inconvenience of high electricity costs and harsh U.S. tariffs presents a challenge to the UK steel industry. Addressing these issues requires coordinated action from both the government and industry stakeholders to ensure the sector's viability and competitiveness. Implementing policies to reduce energy costs and negotiating favourable trade terms are essential steps toward securing the future of steel production in the United Kingdom.
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