Articles in Category: Environment

The US’ pending trade dispute with China over  solar cells and modules, covered on MetalMiner on Nov. 10, looks like it will be successful in encouraging China to review its sales strategy towards finished solar panels; this comes following advice received by trade lawyers hired by Chinese firms to advise them on the  Commerce Department case, the NY Times reports.

Chinese solar panel manufacturers have apparently been advised they will stand little chance of success in the case, presumably because they are  engaging in dumping and  benefiting from subsidies, as US panel-makers claimed. Interestingly, like Japanese carmakers in the 1980s, Chinese solar panel manufacturers are said to be considering moving final assembly to the US so their panels become US-made.

However, because the case  covers both cells and modules, China would have to give up cell manufacturing as well. The manufacture of  solar panels  is   essentially a four-step process. According to the NY Times, molten polysilicon is used to grow crystals or cast blocks of polycrystalline silicon as the first step. The second step is cutting and polishing the material into thin, smooth wafers. The third involves chemically treating the wafer and adding electrical contacts — this essentially makes it a solar  cell. The fourth requires connecting 60 to 72 cells together, covering them in glass, a frame and adding an electrical junction box to make the finished module. It is this last stage the Chinese are considering moving to the US.

Good news, you may think, US assembly jobs and taxes! No, this final step in the process is said to be worth only some 15 percent of the cost of a panel and is either largely automated or uses low skilled labor. The value is in stages 1 and 2, which China is looking to keep at home, while shipping the finished wafers to South Korea or Taiwan for stage 3, thereby hoping to circumvent potential duties on Chinese origin components.  However, because  most of the intellectual property and capital investment is in the cell stage, U.S. manufacturers say they are confident they can compete with cells and modules made in other countries where the product is not dumped or subsidized, even if the wafers come from China. So the case is unlikely to be amended to meet the Chinese attempts to get around origin issues.

Continued in Part Two.

–Stuart Burns

The game has changed for the nuclear industry post-Fukushima, at least in the Western world, if not globally. After previous nuclear incidents, there usually was a pause while national bodies reviewed the reasons for the event and upgraded safety standards, but the Fukushima incident seems to be impacting Europe much like Three Mile Island did the US.

Germany, one of Europe’s biggest operators of nuclear power, used to run 17 reactors until Berlin closed four of them in July and committed to closing the rest by 2022. Belgium is looking to accelerate the closure of its seven plants and Switzerland is going the way of Germany. Even in France, where nuclear power generates more than 75 percent of electricity, the new socialist contenders for next year’s elections campaign on a platform that includes a drastic drop in nuclear-generating capacity to below 50%.

Who Benefits and Who Suffers?

As a result, not just generators are feeling the winds of change. Siemens pulled out of a technology joint venture with Russia’s Rosatom to develop new nuclear technologies. Recognizing that any new plants are likely to be in emerging markets, firms like France’s Aerva have started work on the Atmea, a smaller, cheaper reactor, in partnership with Japan’s Mitsubishi Heavy Industries rather than relying solely on the firms’ technologically advanced but high-cost EPR reactor design, best suited to highly regulated markets within Europe.

Likewise, Rosatom, which since Fukushima has continued securing new orders from China, Vietnam, Belarus and Bangladesh, is seeking new technology partners that can help it develop safer, more robust systems without pricing itself out of a market which will soon be competing with Chinese as well as existing South Korean manufacturers. Although Rosatom has a monopoly over Russia’s 11 civilian nuclear power plants and accounts for one-fifth of new reactors under construction worldwide, Sergei Kirienko, Rosatom’s president, admitted last week that there is a risk of world demand for nuclear reactors collapsing after Fukushima, saying competition has been much tougher.

For now, Britain is holding to its ambitious program for 12 new reactors by 2025, needed (the conservative part says) as part of a wholesale restructuring of Britain’s electricity market aimed at helping the country meet tough carbon reduction targets, as well as keep the lights on. However, start dates keep slipping back and although some operators have committed to land purchases for the new sites, no one believes the first plant will be operational by the previously stated date of 2018. Nor are the conservative coalition partners the Liberal Democrats on board with the plans for nuclear power, much preferring to push for wind or renewable power plants in spite of growing evidence they cannot meet base-load requirements.

Not surprisingly, the share price of both nuclear power-generating companies and manufacturers of nuclear power plants has underperformed in an already falling market. The future is unlikely to be quite as dire as some currently fear, but clearly growth is not going to be coming from established nuclear-producing countries such as the US, Europe or Japan. It will come from emerging markets desperate to reduce reliance on coal-fired power generation — and for whom the level of technological sophistication won’t be required to be as high as it is for Europe.

–Stuart Burns

Few sunny days ahead for US solar manufacturing industry. Source: solarenergyfact.org

You may believe it was inevitable. Sooner or later, production of what is essentially a commodity item like photovoltaic solar panels would prove uncompetitive in Western markets as low-cost emerging markets reached critical mass and, in something of a downturn, flooded the market at prices Western producers could not match. Just about everyone commenting on the sector has been predicting the industry will only take off when panel prices drop to a level where electricity generation is economically viable without subsidy.

I should say we are not there yet; solar panels still require subsidy. In parts of Europe, they benefit from feed-in tariffs twice the current cost of power from the grid, guaranteed for 25 years as a government incentive. But panel prices in the US are reported in a NY Times article to have fallen dramatically in recent years. Wholesale prices are currently $1.00-1.20 per watt of capacity today, down from $1.80 in January and $3.30 in 2008.

Most were hoping falls in price would come from technological development and mass production, but in truth much of the fall has come about due to the market becoming awash with Chinese solar panels. From nothing in the middle of the last decade, Beijing has engineered phenomenal growth, both in domestic installed capacity and in exports. Chinese companies now export some 95 percent of the country’s solar panel production and are said to have three-fifths of global production capacity. Good news for consumers looking to take advantage of solar power, good news for the environmental lobby keen to see the uptake of renewable energy, and good news for installers for whom lower panel costs have helped fuel an industry that is growing generating capacity at 70 percent per year.

So is everyone happy? No; spare a thought for the domestic US solar panel manufacturing industry. Massive investments were made in production facilities to meet the projected demand. Controversial cases like that of Solyndra, the failed beneficiary of $528 million of government largesse (notwithstanding the impact of Chinese imports) have been dramatic.

Two other major US solar manufacturers that together are said to have represented one-sixth of US production capacity went bankrupt in August, and four others are laying off workers and cutting output. Seven producers led by Solar World, the US subsidiary of a German producer (the six other firms have kept their identities secret for fear of reprisals in accessing China’s market although how they expect to compete in China if they can’t compete in their home market is unclear) have called for anti-dumping and anti-subsidy cases against a wide range of Chinese solar panel makers.

The producers are calling for tariffs of more than 100 percent in retaliation for what they say are unfair government subsidies allowing Chinese makers to sell panels in the US, which would normally be 50 to 250 percent higher in their home market. In a Financial Times article, Timothy Brightbill, a partner with Wiley Rein, the law firm representing SolarWorld, said “China has a system of pervasive and illegal subsidy payments, including government cash grants and subsidized loans to the industry and subsidized raw material inputs. (Watch MetalMiner’s recent video interview with Brightbill here, where we discussed export restrictions and state-owned enterprises in regards to Trans-Pacific Partnership negotiations.)

Law requires the Commerce Department to issue a preliminary decision on the anti-dumping claim possibly in mid-January, but no later than late March, and on the anti-subsidy claim, no later than mid-May. Many trade experts expect that the decision would include steep tariffs on imports, but the ruling may be too late to save large sections of the US industry.

The issue is a politically charged one in Washington; President Obama made green technology and US jobs an objective by which his presidency would be judged, yet at the same time the US needs another trade dispute with China like it needs a hole in the head. The outcome is likely to be the worst possible for both issues.

–Stuart Burns

China’s attempts to play by the rules seem to keep cropping up.

(Well, who knows if Beijing is actually willing and able to play by the rules, or if it’s all for show but that’s another issue.)

Disregarding the fact that China blatantly eschews trade rules and regulations (with their rare earths and other raw materials restrictions deemed illegal by the WTO earlier this summer), they’re making outward efforts to play nice in two areas carbon emissions and illegal rare earths mining.

As for the emissions angle, “China will not allow its carbon dioxide emissions per person to reach levels seen in the US, according to the minister in charge of climate policy, Xie Zhenhua, [who] said that to let emissions rise that high would be a Ëœdisaster for the world,’ according to a recent BBC article.

Right off the bat, that pronouncement seems moot the sheer volume of emissions in China coupled with sub-par emissions standards as compared with the US make China a much more dangerous polluter. It doesn’t matter that China’s “per-capita emissions aren’t as high as the US’ it matters that a country of more than 1.2 billion is building and consuming at remarkable rates. Throw in GDP growth trends and future forecasts, and¦well, we can see where this is going. Once the beast has grown, it has to maintain an adequate caloric intake into adulthood.

In other news, China has moved to implement specialized invoicing to be used by rare earths producers, in order to clamp down on illegal rare earths mining, according to a Mineweb piece. Audits have been bandied about before, but now, part of the problem is that rare earths without invoices have been selling at lower prices than not. For example:

“Lanthanum cerium was being sold for $ 34,488 per tonne with invoice, and $ 23,515 per ton without invoice. In Baotou, Inner Mongolia, one dealer who had purchased several thousand tonnes of rare earth carbonate at a price of $ 14,109 per tonne, was said to be desperately seeking buyers.

As we know, the Chinese want prices to rise again since they came off more than 30 percent over the last month. According to the article, dealers don’t want to sell their inventories at the current low prices. So this method of introducing invoices seems to be a good play to raise prices just as much as it is to clamp down on illegal mining.

Ahh, Beijing industrial policy¦always a good topic to mull in the morning.

–Taras Berezowsky

Andrew Browning, executive vice president of Consumer Energy Alliance (CEA), speaks with MetalMiner Editor Lisa Reisman at CEA’s offices in downtown Chicago.

MetalMiner recently had the chance to speak with Andrew Browning, CEA’s executive vice president, about the organization’s work and the importance of not only advocating for the continued, responsible use of oil, natural gas and other sources, but for a domestic energy policy tying it all together. In the segment above, Browning addresses the controversial process of hydraulic fracturing, known in shorthand as “fracking.”

The process is controversial mainly because it has been blamed — perhaps not entirely accurately, according to this Wall Street Journal article — for increased methane levels in drinking water, among other things. While Browning stated that the process of fracking is safe, according to the CEA and the natural gas industry, he also hinted at continued room for improvement.

Check in later today for more on the connection between shale gas production and the growth of the US economy.

–Taras Berezowsky

Continued from Part One.

Manufacturers have been saying for months that compliance-based mandates from the EPA will hamper economic growth efforts.

According to the WSJ piece, EPA rules to be released later this year will mandate mercury-and-other-pollutant-reducing systems to be in place by 2015 (three years after the ruling), which some energy companies say is literally impossible. Duke Energy told the EPA that its average lead-time for retrofitting scrubbers systems that filter the pollutants — was 52 months, including the design, purchase and installation of equipment; for Southern Co., it was 54 months.

Jennifer Diggins, director of public affairs at Nucor, told MetalMiner that the business community is planning for a lot of uncertainty, and echoed the sentiment that major decisions are seen as being put off mainly for political purposes (the EPA’s ozone standards, for example, are not set to be reviewed again until 2013, after the next election, Diggins said). Furthermore, if the EPA had its way with establishing “attainment vs. “non-attainment zones that determine pollution by community, the agency could shut down certain construction and infrastructure projects if their pollution emissions break particular thresholds.

The point of the Journal piece was that President Obama could ultimately overrule EPA Administrator Lisa Jackson’s rule-making due to a 1990 proviso in the Clean Air Act. If he does that, it may make manufacturers happy in the short run and possibly spur employment growth; but in the longer run, it could partly be seen as putting off the necessary steps to transition away from burning fossil fuels for our energy needs. Even still, it seems political suicide to forsake support of one industry for another, especially if the older one (coal power) is established and the operational infrastructure/proper capacity for the new one (Ëœalternative’ power) barely exists yet.

How long can we kick a can down the road? And what should the EPA’s ideal role be with regard to manufacturing? Leave a comment!

–Taras Berezowsky

Source: International Business Times

With Hurricane Irene wreaking havoc up and down the East Coast the past few days, the importance of electricity and power generation has come into full view superficially for those not in Irene’s crosshairs, but very painfully for millions of others.

Overall, some 6 million US homes lost power in the wake of the powerful storm, with power outages affecting a total of 13 states. At the beginning of the week, 1 million New Yorkers were in the dark, as well as 850,000 in New Jersey, Pennsylvania and Maryland (Baltimore got hit particularly hard), and both Vermont and Connecticut experienced records in flooding and outages, according to Bloomberg BusinessWeek.

So clearly, the grid has been and will continue to be strained, and the pressure is on to restore power. Amidst Irene’s aftershocks, another battle is being waged on electrical power generation this one involves the Environmental Protection Agency (EPA).

A recent Wall Street Journal opinion piece highlighted the EPA’s proposed regulations to come for coal-powered plants across the country. The editors state that these clampdowns will primarily affect the power grid in unprecedented ways ways in which disasters like Irene exacerbate. “The spree affects plants that provide 40% of U.S. baseload capacity in the U.S., and almost half of U.S. net generation, they write. “The Federal Energy Regulatory Commission¦reported this month in a letter to the Senate that 81 gigawatts of generating capacity is Ëœvery likely’ or Ëœlikely’ to be subtracted by 2018 amid coal plant retirements and downgrades.

The WSJ surmises that about 8 percent of US generating capacity will be hamstrung due to these rules. The implications of the EPA’s agenda are quite far-reaching. If the facts that the Journal cites are true, then the grid will be way overburdened, causing far more blackouts and brownouts even during normal times needless to say, these would spike exponentially come another hurricane.  But beyond that, corporate compliance measures, many argue, directly affect manufacturing growth by diverting capital and other resources away from building the economy.

Some more extreme (and quite frankly, ridiculous) voices such as Republican presidential candidate Michelle Bachmann’s have completely shunned the EPA and its aims: “I guarantee you the E.P.A. will have doors locked and lights turned off, and they will only be about conservation. It will be a new day and a new sheriff in Washington, D.C., Bachmann said at a rally in Iowa, according to the New York Times. The paper also mentions “in an earlier debate, she said the agency should be renamed the Ëœjob-killing organization of America.’

While Bachmann represents the shrill voices of extreme conservatism, many manufacturers would agree with the essential nugget of that last phrase, and have publicly said so repeatedly.

The EPA’s effects on manufacturing continued in Part Two.

–Taras Berezowsky

“China Moves to Support Its National Champions as the Bottom Drops Out of the Solar Market” should be the title. As an FT article points out, the price of photovoltaic solar panels has fallen by around a fifth this year and by nearly two-thirds since 2008. Overcapacity in polysilicon and finished panels — and low-cost Chinese production — are responsible for the decline, but the fall in growth rates is exacerbating the situation this year.

Source: Financial Times

Western manufacturers are closing factories and slashing workforces as subsidies in cash-strapped European markets are withdrawn or scaled back. Feed-in tariffs have been dramatically reduced in Spain and Italy, and even prosperous Germany is reducing rates. The reduction in subsidies is expected to slow the volume growth rate of solar panel sales from 65 percent annually over the past five years to about 15 percent through 2016, according to Lux Research quoted in the article. The good news from Lux is the fall in costs and rise in wider power generation costs may make photovoltaic cell electricity production economically viable by 2016 now wouldn’t that be a development for renewable power!

High profits and phenomenal growth rates have not helped the industry, which remains far too fragmented to consolidate even while the going was good. Now that growth rates are tumbling and additional new lower cost capacity is coming on-stream, excess capacity is a major problem. According to another FT article, spot market prices of solar cells and wafers have fallen by about 40 percent since the beginning of the year and are now below cash cost for many manufacturers.

Even if the industry doesn’t opt for consolidation, rationalization will result as weaker players exit the stage. Overcapacity will get worse this year and next, favoring the larger manufacturers mostly Chinese vertically integrated companies. A doubling of production output has historically translated to costs falling by a fifth, according to a joint report by the European Photovoltaic Industry Association and Greenpeace, cited by the FT. Nor is there anything really to choose between the manufacturers in terms of technology, so where brand plays a role, no producers have clear technological advantages.

Whether Beijing recognizes this as an opportunity or sees it as a threat that needs countering, the fact remains they have moved swiftly to support the major domestic players. Even though firms like Yingli derived only about 5 percent of their sales from the domestic China market in the past, they are rapidly refocusing efforts at home following Beijing’s announcement of the first national feed-in tariff for solar projects that aims to raise solar power supply tenfold in just five years, as this article reports. Just as a similar tariff for wind projects in place since 2009 has propelled China to become the world’s largest wind farm operator, the solar feed-in tariff will, it is widely expected, have the same impact for solar.

In the same way that state support and protection for steel, shipbuilding and electronics propelled Japan and then South Korea to become today’s No. 1 or 2 in those industries, so China’s support for key industries — a bewildering array of industries — will result in them becoming the unassailable No. 1   in many of the new renewable energy industries evolving today.

–Stuart Burns

MetalMiner’s editor Lisa Reisman speaks with Jennifer Diggins, director of public affairs, Nucor, about the EPA.

In our first Nucor interview installment, MetalMiner discussed the legislative landscape in Washington with Diggins. The verdict seems to be that nothing much is going to happen for quite some time.

If there’s no activity on the front for manufacturers, what will further emissions regulations from the EPA mean for businesses that are trying to help grow the economy?

Keep an eye out for more MetalMiner content from Nucor in the following days.

Disclaimer: Nucor is a sponsor of MetalMiner.

This is Part Three of a three-part series. Here are Parts One and Two.

Clearly, poor economic data creates an immediate reaction on the part of markets the world over and unfortunately the herd mentality can create a global rout. We remain less concerned about actual numbers per se, and much more concerned about the political climate in Washington and what that does for the economy.

This reminds me of a class I took while in grad school Intro to Public Policy. We had to write about a particular government policy and then an alternative government policy to a particular issue. I remember getting my hand slapped when I asked, “Can we write about doing nothing as a potential policy alternative to a particular issue? So, the professor didn’t like that question, but certainly “doing nothing has ramifications. We’ll explore this point momentarily.

But First, A Look at the Numbers

As my colleague Taras reported yesterday, auto producers certainly have their share of concerns, particularly over demand as well as too much capacity. Automakers themselves make similar cautious statements for the balance of the year.

PMI data has also turned a bit negative. Although all eyes rest on the closely watched PMI number as it relates to the manufacturing economy (that number went from 55.3 to 50.9) — barely in the growth zone — we tend to look at some of the report’s other elements that begin to tell part of the economic story. This month we noted a couple of changes that play a significant role new product orders which moved from 51.6 percent in June to 49.2 percent in July, reversing a 24-month growth trend. The second trend involves the backlog of orders now following a negative two-month trend moving from 49 percent to 45 percent in July. The one bright spot: export orders. At least they appear to continue to grow.

But as we reported yesterday, if absolute consumer demand continues on its current trend, we can envision a scenario where any second half manufacturing dip might show stronger numbers early in 2012. Of course, that requires more than faith, but sustainable underlying consumer sentiment.

Washington Has Put the Brakes on the Economy

Whether you believe John Maynard Keynes has little to do with what actually occurs in Washington (or rather, what doesn’t). Consider the following issues repeatedly articulated by companies in the manufacturing sector (some of those companies hold great sums of cash):

  1. What will corporate tax rates look like in 2012 and beyond?
  2. Will we have a carbon tax?
  3. How will the EPA regulate ozone standards? How many companies in each state fall “out of compliance?
  4. Will the NLRB (National Labor Relations Board) allow businesses to grow in right-to-work states?
  5. What will new health-care legislation actually cost my company and by when?
  6. Will we take advantage of lower-cost natural gas to create energy independence or will we put in place regulations with unknown costs?

These issues represent the lion’s share of what businesses need Washington to address to justify the “investments needed by our economy. Define the unknowns and let businesses develop the ROI and business case to spend some of that cash. Leave these areas nebulous, and it’s no wonder the cash sits on the sidelines.

–Lisa Reisman

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