Analysis by Newton reveals that demand peaks have the potential to lead to price spikes, which may impact project delivery. Due to the nature of the projects outlined to hit the 50GW target, the industry will require steel unevenly over the next 7 years.
For example, in the period 2025-2027, Offshore Wind will require almost 3.8 million tons of steel for UK production. Indeed, if the UK were to supply all of the Offshore Wind steel domestically, this figure would represent 23% of our annual steel production through 2025-2027 to meet the 50GW target.
If supply is not ramped up domestically, which looks unlikely after the closure of furnaces at Port Talbot, peaks in demand will likely need to be met by the international market. With other countries also advancing their own wind power capabilities, it seems likely that this demand for international steel from the UK offshore wind industry will lead to a spike in international steel prices.
Offshore wind farms are steel intensive structures, with the main uses of steel located in their foundations, particularly the substructure, the monopile and the jacket. Indeed, floating farms are far more steel intensive, than fixed farms, with the floating variant using 267 tons of steel per Mega Watt (“MW”), compared to fixed variants requiring 217 tons per MW, 50 tons per MW less.
In a survey of senior leaders in the offshore industry last year, Newton found that more than a quarter of executives (27%) said establishing a specialist supply chain at scale to support floating offshore wind should be a top priority.
Dan Parker, Partner at Newton, comments, “The UK’s offshore wind sector has ambitious targets to meet, set out by the government’s commitment to produce 50GW of wind power by 2030. Fundamental to reaching this target will be ensuring existing UK offshore wind projects are delivered on time and on budget. This means they need the requisite raw materials to be available at the price they’ve planned for.
“To ensure we’re not blown off track, it is imperative that UK industry and government collaborates to ensure a steady supply of steel that can meet the predicted demand peaks as industry flexes to meet the 50GW target. After the closure of the Port Talbot steel works in January, this is no mean feat.
"At the present moment, we’re potentially going to need 3.8MT of steel through 2025-2027 to meet the 50GW target, which represents about 23% of our annual production. If this is not possible, a comprehensive procurement strategy should be a top Government priority - this is a critical step in the road to Net Zero, and to a greener Britain.”
