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United States

Tower job cuts could be first of many for US

US: Tower manufacturers are proving a worrying indicator of the health of the US wind industry, with three firms announcing job cuts last month in a move that looks likely to set a precedent for other sectors.

Vestas announced the loss of roughly 90 jobs at its Colorado tower plant. DMI Industries will shed 167 Oklahoma workers, with another 216 jobs at risk at its North Dakota facility. DMI's parent, Otter Tail Corporation, is exiting the wind business and intends to sell both plants by the end of the year - making a change in product line a distinct possibility.

Texas-based Trinity Structural Towers plans to reposition resources away from tower manufacturing in the near term. And Illinois-based Broadwind is hoping exports will help it survive a domestic wind market expected to fall from as much as 12GW in 2012 to roughly 2GW in 2013.

"Towers are among the first things that go out to a site, so those companies are among the first to feel the lack of orders," said Matt DePrato, a wind-energy analyst at IHS Emerging Energy Research.

"We're going to see a lot more of these layoffs; it is an unfortunate consequence of all this discussion about the production tax credit (PTC)," he added.

Waiting game

The US wind industry as a whole is bracing for a massive wind-market decline in 2013 as the PTC is due to expire this December and politicians are at odds over whether it should be extended.

In August, the Senate Finance Committee voted to extend dozens of tax breaks, including the PTC, in a $205 billion bipartisan bill. However, the package must survive a full vote in both houses of the US Congress - the Republican-controlled House of Representatives, and a final vote back in the Democrat-controlled Senate - before becoming law, none of which is likely to happen before the presidential election in November. Republican presidential candidate Mitt Romney is against extending the PTC.

Worse to come

A study by Navigant expects wind-sector job losses to reach 37,000 by next year's first quarter, and many predict that even if the PTC is eventually extended, the US industry will take months to recover.

"Even if the PTC gets passed in December, we're going to lose at least six months of projects and probably more," said Pedro Guillen, managing partner of Kinetik Partners, a Michigan-based supply-chain consultancy. "It's going to be really, really tough."

One positive development for US tower manufacturers came in July when the US government imposed tariffs of 60- 73% on Vietnamese and Chinese imports to keep below-cost foreign towers off the US market.

Quick to market

Also, US tower makers should be able to react quickly when the market picks up, said Guillen. "Tower making is relatively simple and the investment is relatively minimal," he said. "You can come in and out of the market quickly if you know where to buy the steel."

However, Guillen adds that the advent of bigger turbines and taller towers means that US manufacturers must eventually readjust, regardless of what happens with the PTC. "With 3MW machines, towers will need to be around 100 to 110 metres," Guillen said. "There is going to be a transition from 100% steel into a hybrid system that includes concrete and steel, or even 100% concrete. Standard tower manufacturers will be hurt, because we won't see all-steel towers much longer."

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