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China trade deal no help for rising US wind costs

The recent US-China trade deal does not appear to alleviate the harsh tariffs on Chinese imports that have affected the US wind industry.

Imports on steel in the US has driven up the costs of wind projects (pic: Vestas)
Imports on steel in the US has driven up the costs of wind projects (pic: Vestas)

There is no relief just yet for the wind industry in the trade war with China, according to BloombergNEF wind analyst Rachel Shifman.

Phase one of the deal announced on 15 January only affects the tariffs levied on 1 September 2019, which did not include any wind components.

The timing of a second phase of the deal is unclear, as is the scope of any additional agreement.

"In an election year, it is reasonable to expect that any further concessions by the US would be considered primarily on the basis of increasing President Trump's electoral appeal," said BNEF policy analyst Stephen Munro.

The US presidential election is in early November.

The Trump administration's aggressive 25% steel tariff is the most onerous for wind.

In addition, the US government has imposed a 25% tariff on permanent magnets, which are common in large offshore turbines.

Tariffs on Chinese imports have increased the costs of a US wind project by as much as 20%, consultancy Wood Mackenzie estimated.

Turbine manufacturers have also cited the tariffs as denting their financials. In an analyst call regarding GE's third quarter results, CEO Lawrence Culp in November cited pricing pressure on turbines due to tariffs.

Meanwhile, Vestas executives in early November said that external factors such as tariffs and raw material price increases forced the Danish company's EBIT margin for Q3 down by 5.5%.

Turbine costs had increased by 1.5%, before mitigation, even before the lastest round of tariffs impacted wind components, said Marika Fredriksson, Vestas' chief financial officer.

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