UK industry could face shutdowns as wholesale gas price hits record high | Gas

Wholesale gas costs hit new all-time highs on Wednesday, prompting warnings that factories could be pressured to close down over winter or swap to extra polluting fuels simply as the UK hosts the Cop26 local weather convention subsequent month.

The disaster has already pressured a wave of collapses amongst vitality suppliers that has led to warnings of “desperate choices” for households more likely to face larger payments as a end result.

As power-hungry sectors such as metal, glass and chemical substances combat their very own battle with hovering gas and electrical energy prices, they warned of additional shocks to each industry and shoppers, together with larger costs of products and factories being pressured to briefly shut.

Mounting concern concerning the domino impact of high vitality costs got here as the price of gas for supply the subsequent day reached 350p per therm on Wednesday, whereas gas for supply in November reached 407p, each new data. Prices fell again afterward, after Russia’s president, Vladimir Putin, indicated that the nation, the most important provider of gas into Europe, was ready to assist ease the disaster.

But main figures from energy-intensive industries mentioned severe ramifications have been already on the playing cards until the federal government heeded their name for measures to cut back vitality prices.

Trade physique UK Steel mentioned it was now “uneconomic” to make metal at sure occasions within the UK, with British corporations dealing with double the electrical energy costs paid by rivals in Germany, France and the Netherlands. British Steel, primarily based in Scunthorpe, has begun including surcharges of as much as £30 a tonne to its merchandise to recoup larger vitality prices, growing prices for purchasers within the building and automotive sectors.

David Bailey, professor of business economics at Birmingham Business School, mentioned shoppers could find yourself feeling the pinch if metal remained costly. “They’ll pass it on to consumers ultimately, so it could increase the price of cars,” he mentioned.

Gas prices graphic

Network Rail, which owns Britain’s 20,000 miles of railway and buys about 97% of its observe from British Steel, mentioned it had but to see a rise in costs.

With simply weeks to go till the UK hosts the Cop26 international local weather convention, leaders within the glass and minerals industries mentioned high gas costs could finally result in elevated air pollution.

Richard Stansfield, chief govt of lime producer Singleton Birch, mentioned the elevated value of manufacturing was being handed on to shoppers, together with water corporations and corporations that use the mineral to show waste into vitality.

“We could get into a ridiculous situation where it’s cheaper to put waste into landfill than to put it into waste-to-energy plants,” he mentioned. “There are all sorts of knock-on effects.”

Paul Pearcy, federation co-ordinator at commerce physique British Glass, mentioned corporations that make home windows could be pressured to revert to powering their furnaces with polluting fuels that had been deserted.

“Some of our members still have heavy fuel oil on site, having moved over to gas,” he mentioned. “Some of them are seriously considering moving back to that because of the price of gas.

“As prices go the way they are, it becomes more and more financially attractive but with Cop26 around the corner, it’s not a great advert.”

Glass corporations and steelmakers run their furnaces repeatedly, making it extraordinarily tough, time-consuming and expensive to close down.

Jon Flitney, of the British Ceramic Confederation, mentioned the identical was true of its members’ kilns, that means any resolution to reduce operation would “not be taken lightly”.

However, he mentioned that if costs stay high, “the balance between income and operating costs may shift”.

The glass, metal and minerals industries are all members of the Energy Intensive Users Group commerce physique, which warned of shutdowns in important industries with out assist from the federal government and the vitality regulator, Ofgem.

Richard Leese, the chairman of the group, mentioned: “We have already seen the impact of the truly astronomical increases in energy costs on production in the fertiliser and steel sectors.

“Nobody wants to see a repeat in other industries this winter given that UK energy-intensive industries produce so many essential domestic and industrial products and are intrinsically linked with many supply chains.”

The group has referred to as for exemptions for energy-intensive industries from measures designed to assist fund renewable vitality and penalise carbon emissions.

Any slowdown in work schedules could place an additional drag on the financial system, including to concern in sectors such as building, the place shortages of supplies and workers drove progress expectations to an eight-month low, based on survey figures launched on Wednesday.

Spiking gas costs have already taken their toll on British business, forcing fertiliser vegetation to close down and capsizing 12 vitality suppliers. A thirteenth, Omni Energy, warned its prospects on Wednesday that it could stop buying and selling in November.

Energy adviser Cornwall Insights mentioned it anticipated the impact to drive up family vitality payments into 2023, by driving the government-imposed cap on vitality costs larger.

It expects the vitality price cap, presently set at £1,277 for a median twin gasoline buyer paying by direct debit, to achieve £1,659 for summer season 2022 and £1,663 for subsequent winter.

The business division mentioned: “We are determined to secure a competitive future for our energy-intensive industries and in recent years have provided them with extensive support, including more than £2bn to help with the costs of energy and to protect jobs.

“Our exposure to volatile global gas prices underscores the importance of our plan to build a strong, home-grown renewable energy sector to further reduce our reliance on fossil fuels.”

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