London (Platts)--27Jan2009

UK energy-intensive manufacturing sectors are reporting a drop of up to
50% in their output compared with expectations, the Energy-Intensive Users
Group said Tuesday.

"From information reported from our members in the second week of
January, cuts of 50% have been, unfortunately, typical of most intensive
sectors. We hope some of this demand will come back later in the year, but the
economy is not helping," spokesman Jeremy Nicholson told Platts.

The worst-affected sectors are the construction and automotive sectors,
where demand for finished products, such as steel and cement, is down because
of the recession.

"These are oversupplied markets," he said. Cement and brick and clay pipe
manufacturing is down to 50% of capacity or less; aluminum and chemicals have
been less badly hit by the decline in construction for the time being.

Across the UK, gas demand has been down by about 20 million cubic
meters/day. Some of the reductions will come from householders trying to be
more sparing with their energy use, and also by a greater use of coal-fired
plant to take advantage of lower fuel and carbon prices. The cost of producing
a metric ton of carbon is around Eur11, which does not discourage the use of
coal, he said.

Coal-fired plant has accounted for about half of the mix on occasions, he
said. Electricity demand is also down, by between 500 and 1,000 MW.

Climatically it has been a normal winter, after a few relatively mild
winters, he said.

Other sectors, such as fertilizers, are also affected by the relative
price of gas. The gas cost can account for a quarter of the finished product
price.

Because spot energy prices are highest in the winter, some plants
schedule maintenance during the period.