Higher electricity prices to lift steelmaking costs in Taiwan

The need to offset mounting financial losses being incurred by state-run electricity supplier Taiwan Power (Taipower) has prompted Taiwan to announce higher electricity prices for residential and industrial users to take effect from April, according to a recent release from Taiwan's Ministry of Economic Affairs (MOEA).

The average increase of about 11% will lift electricity rates by about TWD 3.4518/kWh ($0.11/kWh), and with industrial users facing a larger price hike than residential users, major power consumers such as steelmakers will suffer higher production costs, Mysteel Global notes. Specifically, the increase for industrial users will range from 7% to as high as 25% depending on how much electricity certain industries use, the MOEA release announced.

For example, companies which cut their power consumption by more than 10% on year during the latter half of 2023 will see their increase from April limited to 7%. On the other hand, major industrial electricity users that consume more than 500 million kWh a year, if they saw an average increase of power use in the past two years, their rate will rise by 15% to 25% depending on their annual use.

As one of the major consumers of electricity, the steel industry in Taiwan will face higher production costs accordingly. China Steel Corp (CSC), Taiwan's largest steel producer, estimated on Tuesday that its total electricity bill may increase by TWD 1.2 billion after the fee adjustment.

CSC said that it would take a number of actions to address the expected climb in its production costs, including reinforcing its ongoing power saving programs and boosting self-generation. These and other measures should help CSC cut the total electricity fee increment by approximately TWD 990 million or 80%, the steelmaker predicted.

The rate hikes are being rolled out as Taipower faces an accumulated deficit of TWD 382.6 billion as of the end of 2023, local media Focus Taiwan reported. The MOEA had warned earlier this month that without an adjustment to the current electricity rates, the company would incur a further loss of TWD 188.7 billion in 2024 alone, it noted.

The MOEA said that the adjustments to the electricity charge would be in effect from April until September. However, it is unclear whether the increases will be in addition to Taiwan's usual summer power hikes.

Under a scheme introduced by Taipower in 1989 to discourage high electricity consumption during summer when power demand surges, every year between June 1 and September 30, the company levies a special summer energy rate on households and industrial users that can add as much as 27% to their power bills during the period, as Mysteel Global has reported.

Note: This article has been written in accordance with an article exchange agreement between MySteel Global and BigMint.