TRADE TENSIONS WON’T BLOW AWAY
Turbine makers run into turbulence from China on shipments, pricing
Consuelo McNamara and her son Mark didn’t expect to be caught in the crossfire of U.S.-China trade tensions when they went to work last year for wind turbine manufacturer MasTech in Manistee. Clean energy was the industry of the future. Manistee County Commissioners expected MasTech to create 120 jobs by 2011 when they approved a $400,000 grant for the company in 2008. Two years later, MasTech employs 15 people, down from 35 a year ago. An escalating battle over China’s trade practices disrupted shipments of rare earth minerals that American clean-energy companies need. The conflict forced MasTech to stop production altogether for 10 weeks this summer. “We had all the parts for the wind turbine except the magnets,” said Consuelo McNamara, who was laid off in July. While she continues looking for another job, her benefits from MasTech ran out Sept. 30. China controls more than 90% of the planet’s rare earth metals like the neodymium used in each turbine’s magnets. The United Steelworkers of America has complained to the World Trade Organization that China has illegally restricted exports of those minerals and offered other illegal subsidies to drive down costs for its own clean-energy industry. The policy is also driving up costs to compete in the U.S. The Obama administration is investigating the union’s petition and is to decide by January whether to join the WTO case. “We’re getting some magnets now, but at a hugely inflated price,” said Mas-Tech operations manager John Holcomb. “China certainly has the ability to use these restrictions as a weapon.”China’s threats hurt U.S. production
Supplies disrupted, parts prices rise
China’s threat to limit or stop shipment of rare earth elements is dimming Michigan’s vision of clean-energy job growth, say manufacturers who have experienced supply disruptions and cost increases in recent months. “We get slaughtered daily by China sources of capacitors, diodes and switches,” said Lee Wyatt, president of AmpTech, which makes circuit boards for wind turbines and solar panels in Manistee and Beaver Falls, Pa. Down the road from Amp-Tech’s Manistee plant, Mas-Tech Manufacturing stopped production of its Windspire turbines for 10 weeks this summer because it could not secure a reliable supply of neodymium magnets. “Our volume has fallen from about 100 units a month to 50 units a month,” said John Holcomb, MasTech’s operations manager. “The inability to ship negatively affected demand. Now we’re trying to rebuild that demand.” MasTech’s up and running now with 15 people, less than half its year-ago level. Amp-Tech’s employment also has been cut in half to 80 over the last year, Wyatt said. Complaint weighed The Obama administration is deciding whether to join the United Steelworkers of America’s complaint to the World Trade Organization that China’s subsidies of clean-energy manufacturers and export restrictions on rare-earth minerals violate international trade rules. The minerals are obscure elements with tongue-twisting names like neodymium, gadolinium, cerium and praseodymium. They happen to be essential not just to wind turbines, solar panels and electric vehicle batteries, but to guided missiles, iPhones and aluminum baseball bats. China blocked rare-earth mineral shipments to Japan last month after Japan detained the crew of a Chinese fishing trawler in the East China Sea. This past week, the New York Times reported that China halted shipments of some of those same materials to the U.S. and Europe, citing unnamed industry sources. While Chinese officials deny reports that it banned shipments to any country, Holcomb said he’s now paying $12.70 for each Chinese-sourced magnet, more than double the $5.35 he paid a year ago. Free trade advocates argue that there’s no difference between what China is doing to support its fledgling clean-energy industry and what the federal and state governments are doing in the U.S. The U.S. Department of Energy has offered billions of dollars of support to wind, solar and battery projects. States, including Michigan, have delivered generous tax incentives. King Carl XVI Gustaf of Sweden this past week gave Gov. Jennifer Granholm the Order of the Polar Star for her work to promote clean energy. But those in the trenches say American politicians are cheerleading while China is putting points on the scoreboard. “It’s a question of scale,” said Martha Duggan, United Solar Ovonic’s vice president for government and regulatory affairs. “The numbers of programs and the amount of dollars the Chinese government is spending far outweighs anything the DOE and the State of Michigan are able to do.” Uneven subsidies China gave more than $216 billion to subsidize green technology in its economic stimulus package last year, according to the steelworkers union. That’s more than one-quarter of the entire U.S. stimulus package, most of which went to bail out banks, automakers and the over-leveraged insurance giant AIG. Peter Theut, CEO of Ann Arbor-based consulting firm China Bridge, urges trade officials from both countries to seek a compromise. Theut, who has negotiated joint venture agreements for dozens of American companies now competing in China, strongly supports free trade. But even he acknowledges that U.S. support for clean energy does not match China’s. “When China designates an industry as a ‘pillar’ of their economic strategy, we will never dominate that industry because they have made it sacrosanct,” Theut said. China requires that 70% of a wind farm’s material and parts come from domestic sources. Understandably, large Western manufacturers want to sell in China, too. Consequently, at least four major U.S. manufacturers moved production to China since the beginning of 2009, eliminating more than 580 American jobs, according to the Steelworkers’ complaint. Then there’s the labor difference. AmpTech’s Wyatt said he can hire someone at $15 an hour, but after adding state and federal taxes, then mandated health care, that employee costs $30 an hour. “Over there your competitor is hiring someone who is 14 years old, usually female, whom he pays $4 a day and a bowl of rice,” Wyatt said. “So, yes, I am a conservative businessman who is very much in favor of a tariff or embargo so we can compete on a level basis.” • CONTACT GREG GARDNER: 313-222-8762 OR GGARDNER99@FREEPRESS.COM
John Holcomb, operations manager at Mastech Wind in Manistee, sits in front of a 1.2 kilowatt-per-hour wind turbine for residential use.
Jeff Johnson, an employee at Mastech Wind, uses a grinder to remove slag from foundation templates left by a plasma machine in July 2009. Production halted for 10 weeks this summer because of a magnet shortage.
This is a magnetic bearing housing, which protects a round rare-earth magnet, for use in the Windspire wind turbine.
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Great insights....
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