‘Very damaging’: how the Iran war is hitting energy-intensive industries

## Summary
Photograph: Handout ‘Very damaging’: how the Iran war is hitting energy-intensive industries Conflict pushes companies struggling with rising costs in sectors such as steel and chemicals to the edge I n its 160-year history, Somers Forge’s furnaces in the Black Country have cast steel columns for the Bank of England, part of the anchor for the Titanic and – more recently – propeller shafts for Britain’s nuclear submarines. The Iran conflict has arrived as the latest – and for some potentially decisive – blow to industries such as steel and chemicals, already weakened by years of sky-high energy costs and cheap competition from abroad. Photograph: Handout While the company buys some of its energy in advance to lock in prices – a process known as hedging – it is still partly exposed to daily market swings to give it flexibility on how many shafts, valves and nozzles it produces. “My broker contacted me and said we should buy some more energy … but then if you commit to a purchase for gas in 2027 at today’s prices, by the time we get there it could be half that price,” she said. “Then you’re not competitive in the market, because you’re using gas that’s twice the price that everybody else is.” Somers is already seeing steel price rises throughout Europe and suppliers are only holding quotes for 24 hours, when they usually last a month. Gas prices remain well below the £8 a therm Somers Forge was paying at one point in 2022 but Inglis was worried about a return to those conditions. “At that time we were losing money and we had to lay people off.,” she said. “It’s still early days but I think there’s a risk that we could get to that level.” Explore more on these topics Business Steel industry Energy industry Chemical industry Manufacturing sector US-Israel war on Iran Europe features Share Reuse this content

## Article Content
Somers Forge’s monthly gas bill has jumped from £150,000 to as high as £250,000 based on recent prices.
Photograph: Handout
View image in fullscreen
Somers Forge’s monthly gas bill has jumped from £150,000 to as high as £250,000 based on recent prices.
Photograph: Handout
‘Very damaging’: how the Iran war is hitting energy-intensive industries
Conflict pushes companies struggling with rising costs in sectors such as steel and chemicals to the edge
I
n its 160-year history, Somers Forge’s furnaces in the Black Country have cast steel columns for the Bank of England, part of the anchor for the Titanic and – more recently – propeller shafts for Britain’s nuclear submarines.
The economic fallout from the Iran conflict is the latest of many geopolitical headaches the family-owned forge has endured, but it is already “very damaging”, said Tammy Inglis, the Somers finance director.
Energy was about a fifth of manufacturing costs at the forge, which employs 140 people in Halesowen, before the conflict began, but that proportion is now rising. “Everybody just battens down the hatches and spends what they absolutely need to spend,” said Inglis. “You’re in survival mode.”
It is a predicament shared by energy-intensive companies across Britain and Europe.
The Iran conflict has arrived as the latest
– and for some potentially decisive – blow to industries such as steel and chemicals, already weakened by years of sky-high energy costs and cheap competition from abroad. At British Steel’s Scunthorpe plant, the
operating costs of the plant taken into public control last year are already £1.3m a day
.
View image in fullscreen
British Steel’s Scunthorpe plant already has operating costs of £1.3m a day.
Photograph: Peter Byrne/PA
The conflict has disrupted global supplies after Iran
started attacking ships
in the Gulf and choked off access through the strait of Hormuz, the narrow waterway that a fifth of the world’s oil and gas normally passes through.
British wholesale gas prices climbed as high as 171p a therm after the invasion began, their highest level since Russia’s full-scale invasion of Ukraine in 2022, and up from 78p a therm at the end of February. They hovered around 132p a therm at the start of this week.
The UK
imports about 70% of its gas
, leaving it vulnerable to price swings.
Inglis said Somers Forge’s monthly gas bill has soared from £150,000 to as high as £250,000 based on recent prices. “Unfortunately, at the moment, we are literally just having to take the prices as they come.”
Chemicals crisis deepens
The exposure is even worse for the chemicals sector, where companies rely on gas not just to power their plants but as feedstock – the raw material that many products are made from – meaning every spike in prices hits them twice.
The industry in Britain
was already in crisis
before the Iran war began, mainly blamed on high energy prices. Production output has fallen by 60% since 2021, according to the Chemicals Industry Association, with at least 25 sites closing since then.
Peter Huntsman, the boss of the global chemicals group Huntsman Corporation, bought much of the UK operations of Imperial Chemical Industries (ICI) – for decades Britain’s largest producer – in 1999.
A single Huntsman plant remains in the UK, at Wilton on Teesside, employing about 80 people. But the chief executive
threw doubt on the site’s future
if high prices persist into the summer.
View image in fullscreen
Huntsman’s plant at Wilton on Teesside could face an uncertain future if high prices continue.
Photograph: Handout
“If today’s economics were to stay in place for the next three months, I would shut down my [UK] facility and I’d be importing product from China or the US,” he said.
When the first missiles struck Iran, Huntsman imposed surcharges of 20%-30% on its European and UK customers to cover rising gas costs – but that was enough to make some of them look elsewhere.
“A lot of customers will just say: ‘I’m already hurting. I’m just going to shut down my operations … or I’m going to buy from the Chinese instead,’” Huntsman said.
Fellow chemicals magnate Jim Ratcliffe’s Ineos group will be on alert over the impact of the Middle East crisis, as his sprawling empire
attempts to tackle a huge debt pile
.
Ratcliffe
received a £120m government bailout
in December to save its ethylene cracker at Grangemouth, but Huntsman said not every company would receive such support if the crisis dragged on for a long time.
“If you’re an Ineos you’re probably going to get a government bailout. If you’re a small operation with a couple dozen employees, you’re not going to get a bailout,” he said.
“If you don’t have a balance sheet that can weather a storm for a couple of months – and most small companies don’t – yes, they go under.”
‘A broader structural issue’
The situation is just as uncertain across the Channel. The EU has also seen gas prices rocket, exposing the lack of sufficient rewards for
energy intensive steel industries
which are alread

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## Expert Analysis

### Merits
- But chemical cargoes in the region are also significant.

### Areas for Consideration
- If you’re a small operation with a couple dozen employees, you’re not going to get a bailout,” he said. “If you don’t have a balance sheet that can weather a storm for a couple of months – and most small companies don’t – yes, they go under.” ‘A broader structural issue’ The situation is just as uncertain across the Channel.
- Adolfo Aiello, the deputy director general for climate and energy at Eurofer, the EU’s steel representative body, said the war “highlights a broader structural issue.
- Gas prices remain well below the £8 a therm Somers Forge was paying at one point in 2022 but Inglis was worried about a return to those conditions. “At that time we were losing money and we had to lay people off.,” she said. “It’s still early days but I think there’s a risk that we could get to that level.” Explore more on these topics Business Steel industry Energy industry Chemical industry Manufacturing sector US-Israel war on Iran Europe features Share Reuse this content

### Implications
- But the chief executive threw doubt on the site’s future if high prices persist into the summer.
- View image in fullscreen Huntsman’s plant at Wilton on Teesside could face an uncertain future if high prices continue.
- When the first missiles struck Iran, Huntsman imposed surcharges of 20%-30% on its European and UK customers to cover rising gas costs – but that was enough to make some of them look elsewhere. “A lot of customers will just say: ‘I’m already hurting.
- Fellow chemicals magnate Jim Ratcliffe’s Ineos group will be on alert over the impact of the Middle East crisis, as his sprawling empire attempts to tackle a huge debt pile .

### Expert Commentary
This article covers gas, prices, energy topics. Notable strengths include discussion of gas. Areas of concern are also raised. Readability: Flesch-Kincaid grade 0.0. Word count: 1580.