Taiwan will increase electricity prices by an average of 11% in April, which will undoubtedly push up the cost of steelmaking in the country, Kallanish notes.

Industrial electricity costs will increase by 7-15%, depending on the situation of each manufacturer. Companies that reduce electricity consumption by more than 10% year-on-year will enjoy the minimum increase rate. However, if their electricity consumption increases annually by more than 500 million kWh for two consecutive years, they will need to pay the highest increase.

Steel mills will be hit by rising costs. China Steel Corporation (CSC), Taiwan's largest steel mill, estimates that it may face an electricity bill increase of 12% or 15%, which means an annual expenditure increase of TWD 800 million ($25.1m) or TWD 1 billion. The specific value will be determined after the final announcement of electricity fee adjustment at the end of March.

For electric arc furnace plants, the impact of rising electricity costs is likely to be stronger than for BF-BoF plants. Domestic steel demand was poor in the first quarter, but some steel mills such as CSC still raised their quotes in order to pass on costs, a move criticised by downstream companies. Some Taiwanese end users lambasted CSC for treating downstream buyers as a “cash machine".

Given demand has not yet recovered but costs are rising, the electricity tariff hike will undoubtedly hit Taiwanese steel mills with some difficult decisions.