Britain warned of looming crisis due to soaring wholesale energy prices

The British steel industry's lobby group warned on Monday of an impending crisis due to soaring wholesale energy prices which could force plants into expensive shutdowns, stoke emissions and sow chaos through supply chains.

A shortage of natural gas in Europe had sent prices for electricity and gas soaring, triggering sharp rises in the prices paid by people heating their homes or for major heavy industrial plants smelting steel.

"These extraordinary electricity prices are leading to smaller or wiped-out profits and thus to less reinvestment," UK Steel, which lobbies on behalf of the British steel industry, said in a briefing document.

"With winter approaching, demand for gas and electricity will rise, and prices could get higher, which will make it impossible to profitably make steel."

As the West comes to terms with a massive splurge by governments during the COVID-19 lockdowns, investors are increasingly concerned that steep price rises will whiplash the world's biggest economies, making money more expensive, tipping companies into the red and eroding wages.

UK Steel said some plants may have to shutter their production "for increasingly extended periods with the consequences not only for individual companies but also UK steel supply to the UK economy and UK jobs."

Sudden shutdowns could damage equipment, increase costs and ultimately lead to "poorer environmental performance with higher emissions," it said.

UK Steel called on the government to help.

Britain could, it said, provided a fixed amount of capacity at a competitive price or a virtual interconnector.

Unless the government helps, "the consequences will be dire for our industry," it said.

On Sunday, business minister Kwasi Kwarteng said the government was working out how to support energy-intensive industries hit by soaring gas prices, saying it was a "critical situation".