Tata Steel calls on UK government to act on energy costs

London (Platts)--9 Mar 2012 1012 am EST/1512 GMT

Tata Steel Europe has expressed concern over increased competitive disadvantages regarding electricity costs for its units in the UK.

It calculated that its facilities in the UK are paying 50% more for electricity than its site in France, and 25-30% more than its site in Germany.

On Thursday, Karl-Ulrich Kohler, the head of Tata Steel Europe, said the disadvantage for producing steel in the UK could be calculated at GBP5/mt of steel, according to local press reports.

A company spokesman on Friday confirmed that Tata Steel wants the UK government to apply a mitigation package for heavy energy users (GBP 250 million) announced in November 2011 and discuss further measures to mitigate the disadvantage compared with other continental markets.

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In March 2011, the UK government announced measures on carbon credits, affecting energy prices. This April, the impact on prices is expected to increase further as subsidies for renewable energy will be introduced.

Comments from other crude steel producers in the country, such as the Spanish electric arc furnace producer Celsa, were not immediately available.

Market observers cited the impact that the cost disadvantage could have had on a longs producer in the country, Thamesteel. Its plant, located in Kent, went into administration in January and it is now on offer for a takeover, according to the appointed administrators, Mazars.

According to Platts data, continental European wholesale power prices for delivery next year are around 20% below the comparable UK wholesale power prices (Platts ContiCal 13 at Eur53.12/MWh vs UK Year-Ahead at Eur64.50/MWh, as of 8 March).

French heavy-energy users benefit from generous tariffs. In the spring of 2010, the local Exeltium industrial consortium comprising electricity intensive industrial power users, including ArcelorMittal, entered into a 15-year supply contract with state-controlled EDF. The consortium said the deal would provide its members with "long-term visibility."

German steel manaufacturers, on the other hand, have to pay part of the renewable energy subsidies, according to a market analyst. Last July, the German long steelmaker Saarstahl announced its intention to acquire a 310 MW coal-fired power plant from RWE as "rising energy costs in Germany represent a real competitive disadvantage."

--Emanuele Norsa,

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