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

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It calculated that its facilities in the UK are paying 50% more forelectricity 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, saidthe disadvantage for producing steel in the UK could be calculated at GBP5/mtof steel, according to local press reports.

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

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

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

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

According to Platts data, continental European wholesale power pricesfor delivery next year are around 20% below the comparable UK wholesale powerprices (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 springof 2010, the local Exeltium industrial consortium comprising electricityintensive industrial power users, including ArcelorMittal, entered into a15-year supply contract with state-controlled EDF. The consortium said thedeal would provide its members with "long-term visibility."

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

--Emanuele Norsa,