The UK’s steel industry is struggling to compete with European competitors because of the high cost of domestic electricity, a trade body has warned.

The sector’s energy use is already equivalent to around 800,000 homes, but decarbonisation efforts will lead many producers to switch away from blast furnaces to using electric arc furnaces instead. Just a single electric arc furnace uses about 0.5MWh of electricity per tonne of steel – mass roll-out of the technology is therefore expected to double the sector’s electricity usage.

According to UK Steel, domestic steel producers pay as much as 50% more than competitors in France and Germany, accounting for an additional £37m in electricity costs.

The average price faced by domestic steelmakers for 2024/25 is £66/MWh compared to the German price of £50/MWh and French price of £43/MWh. UK Steel said the main driver of the price disparity is due to the UK’s reliance on natural gas power generation.

The sector has struggled in recent years, with...