China's wind tower makers expect limited impact from US tariffs

Chinese wind tower manufacturers say overseas factories under construction will limit the impact of US import tariffs on their future business.

The US Department of Commerce announced on 30 May that it will introduce countervailing duties (CVDs) of up to 26% on Chinese wind tower imports after a preliminary investigation into unfair subsidies.

The ruling will be followed by a decision on whether the firms have also been dumping product in the US, to be announced in the third quarter.

However, Shanghai-based Taisheng Wind and Suzhou-based Titan Wind Energy claim in statements that they will see limited damage from the combined import duties.

Taisheng, subject to CVD duties of 19.87%, says construction of a factory by its Canadian subsidiary TSP Canada Towers is making “smooth progress” and is expected to be completed, and enter pilot production, by the end of 2012.

“Through this overseas subsidiary, the company will not be subject to the countervailing duties. Therefore the company believes that the duties will not have a serious negative impact on our future business,” it says in a statement to the Shenzhen stock exchange today.

Taisheng Wind did not export any utility-scale towers to the US in 2011, but has earned $4.6m from the American market since 1 January this year.

Suzhou-based Titan Wind faces the highest tariffs, at 26%, and a larger potential impact after establishing exports to the US worth 364m yuan ($57m) last year – 38% of the firm’s operating income.

Most of the exports were to GE, says sales manager Sha Shilei.

“The US preliminary ruling on anti-subsidy duties does not affect already signed orders but it could have a negative impact on future export orders,” Titan confirmed in a statement last week.

Chinese towers can be 5-10% cheaper than locally made towers when exported to the West Coast, says Sha, but exporting to the East Coast is not competitive because of higher transport costs.

Titan’s statement adds: “Currently the company’s order book is full. In the short-term, this dual investigation will not have an impact on our performance.”

The company will continue to put its case to US government officials and seek a “fair and reasonable” final ruling.

It has also started setting up manufacturing bases in India and Denmark to reduce future impact of the tariffs.

The action taken by China’s tower makers is similar to moves by the country’s solar panel producers, which have also been hit in recent weeks by US anti-dumping duties. The solar companies are expected to work around the tariffs by outsourcing manufacturing to other locations.

Titan announced last week that it will provide its Singapore unit with $20m in cash to fund a new manufacturing base in Denmark.

The European subsidiary will focus on R&D, design, manufacturing and sales to regional markets.

“The company will also continue to expand sales into other international markets and the domestic market to reduce the impact of the US investigation,” says Titan’s statement.

Chinese companies say that competition in the domestic market is fierce and tower makers need to build up exports to maintain growth.

However, demand from the US market is also slowing with the planned expiry of the production tax credit (PTC) holding back plans for new wind projects.

Titan Wind has not received any orders from the US so far this year, Recharge understands.

The US investigations into Chinese wind tower imports followed a complaint last year by the Wind Tower Trade Coalition, which claims its members are harmed by subsidies on products from China and Vietnam. The group includes Broadwind Energy, DMI Industries, Katana Summit and a unit of Trinity Industries.

The final determination on countervailing duty rates is scheduled for August, followed by a vote by the US International Trade Commission in September on whether to allow the duties or not.