Swiss Government’s Strategic Support for Struggling Steelmakers
In March 2025, the Swiss Federal Council announced the retroactive introduction of a transitional support program for steel and aluminum producers. The four-year subsidies, which apply from the beginning of 2025, aim to address the financial strain caused by high electricity prices and grid fees that have significantly impacted Swiss steel companies.
The government's support package will be allocated to companies such as Swiss Steel and Stahl Gerlafingen, which have been struggling due to rising production costs and challenges in maintaining competitive pricing against international counterparts. Under the new scheme, producers will receive a discount on the fees associated with using the national power grid. The discount structure is as follows:
• Year 1: 50% reduction
• Year 2: 37.5% reduction
• Year 3: 25% reduction
• Year 4: 12.5% reduction
The total amount allocated for this initiative is estimated at 37 million Swiss francs ($42 million), aimed at helping Swiss steel companies regain their competitiveness in the global market. These subsidies are designed to alleviate some of the pressure caused by the rising energy costs that have caused production and job cuts at steel plants in Switzerland.
A Necessary Step to Ensure Industry Competitiveness
In recent years, the rising cost of electricity and grid usage has been a key concern for many steelmakers across Europe, and Switzerland has not been immune to these challenges. Companies like Swiss Steel and Stahl Gerlafingen have seen their production costs increase significantly, putting them at a competitive disadvantage against countries with more favorable energy policies.
By introducing these state subsidies, Switzerland aims to mitigate the competitive disadvantages that its steel industry faces due to higher energy costs. This intervention is particularly significant as the steel sector in Switzerland plays a critical role in the economy, providing numerous jobs and supporting various industrial sectors.
Strict Conditions and Industry Concerns
While the introduction of the subsidy package has been welcomed by some within the steel industry, it has not been without controversy. Due to strict conditions attached to the subsidies, some companies have expressed concerns about the program's long-term benefits. Specifically, to qualify for the support, companies must present a business plan demonstrating their commitment to maintaining operations within Switzerland. Additionally, the subsidy agreement prohibits the distribution of dividends or special and variable remuneration during the support period, further tightening the terms for companies that wish to benefit from this aid.
Despite these restrictions, the support package is considered a necessary lifeline for struggling steelmakers, helping them weather the high-energy-cost storm and avoid more drastic measures such as closing facilities or laying off workers.
A European Problem: Energy Prices and Industry Support
The challenges faced by Swiss steelmakers are not unique. Across Europe, steel industries are grappling with similar issues related to high energy prices and lack of government support mechanisms. Unlike countries like France, Italy, and Spain, where steelmakers benefit from energy price protection mechanisms, the UK steel sector has also voiced concerns about the lack of energy price safeguards. The UK Steel association has called for similar interventions to protect energy-intensive industries from rising energy costs, suggesting the need for a bilateral contract for difference mechanism to provide price parity.
In comparison, the Swiss government’s move offers a proactive solution to maintain the economic resilience of the steel sector by easing the burden of energy costs. It is an essential intervention at a time when the sector is under significant stress due to global energy volatility and geopolitical tensions.
Key Takeaways:
• The Swiss government has introduced four-year subsidies for steel and aluminum producers to help offset high electricity and grid fees.
• The subsidies will reduce power grid fees by up to 50% in the first year, with a gradual reduction over four years.
• 37 million Swiss francs ($42 million) have been allocated for this initiative to help Swiss Steel and Stahl Gerlafingen.
• Companies must meet strict conditions, including providing a business plan and not distributing dividends or special remuneration.
• Rising electricity prices have become a major concern for Swiss steelmakers, leading to production and job cuts.
• This initiative is part of a broader trend across Europe where countries are seeking ways to protect energy-intensive industries like steelmaking from high energy costs.
• Swiss companies have expressed mixed feelings about the state aid, given the tight restrictions placed on the support.
