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US Tariffs, High Energy Costs Taking Toll On Already Insecure UK Steel Sector - Company
Umer Jamshaid Published December 12, 2018 | 09:23 PM
UK steel is being rendered increasingly uncompetitive in the face of market flooding over high US tariffs and escalating energy costs, Peter Davies, co-founder of the West Midlands-based Original Steel Services Ltd (OSSL) group of companies, told Sputnik.
"The fact is you can only process steel by using lots and lots of energy. You can't do it any other way. We are talking something like ten percent of our total costs being energy. Fifty percent of our electricity bill now involves green energy charges. That is unbelievable. So then our energy, even if you take off that fifty percent, is more expensive, but the fact is that all these [green] tariffs have ensured our energy costs are more than fifty percent higher than costs in France and Germany. It makes us totally uncompetitive," Davies said.
A report published last week by UK Steel trade association claimed that UK steel manufactures were paying over 50 percent more in energy costs than their counterparts in Germany and twice the amount due in France.
According to the report, the average electricity bill for UK steel manufactures comes out at around 65 Pounds ($82) per megawatt hour, itself markedly higher than the German rate of 43 pounds ($54) and the comparatively minor French price of 31 pounds ($39) per unit.
The findings went on to claim that the level of disparity between electricity costs in the United Kingdom and Europe had increased for the third consecutive year, potentially creating a double set of burdens in the face of renewed competition overseas and the struggle to prepare for a potential no-Brexit deal.
UK steel is argued to be an important facet of the UK's manufacturing base, with the sector directly employing almost 40,000 people, with an additional 50,000 in associated fields.
According to Davies, all these factors are prompting a gradual relocation of manufacturing operations abroad.
"Already we are building relationships with forges in Bosnia and in Romania ... and sooner or later we [may] move production ... already we have got production going on in Romania because you can't afford to do it in the UK," Davies added.
The advent of US President Donald Trump's unpopular tariffs on EU steel may also be having a less than desirable impact, not because UK steel exports to the United States have ceased but because of the threat of market flooding from producers otherwise deterred from exporting further west.
Trump sparked uproar in February this year by announcing a 25-percent tariff on imported steel from EU markets, something that initially caused panic in the UK steel sector exporting around 350,000 tonnes of steel into the US market annually.
Although UK exports have at times enjoyed something of a boost in competitiveness from a steadily weakening national Currency, encroachment by foreign producers now viewing UK steel as a "soft market" is believed to be yet another problem, one that is argued to be directly related to US tariffs.
"The weakening of the pound made us more competitive and has written off some of the other costs. But the fact is that one of the problems in the steel industry is the American tariffs," Davies argued.
Davies added that manufacturers from Turkey, China and Russia do not have an opportunity to export to the United States as before and thus are viewing the United Kingdom as a nice soft market creating a very high level of competition.
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