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Siemens, Vestas already winning as U.S. considers bulk power equipment needs

China 2432 European Union 588 Germany 204 Industrials - Capital Goods 409 Tariffs 1572 U.S. 4291

The U.S. utility industry is awaiting more information from the Trump administration as to what new restrictions may be put in place on purchasing from China and other national adversaries, Bloomberg reports. President Trump signed an Executive Order on May 1 instituting a process to “secure the U.S. bulk-power system” that at the minimum will generate an annual report on sourcing and at the most could lead to outright import restrictions. The Energy Department is scheduled to issue clarifying commentary by Sept. 28.

There are already small-scale actions being taken. As outlined in Panjiva’s research of May 7 the U.S. Trade Representative has launched a section 232 “national security” review of imports of power transformer cores. Further cases may be launched covering the industry more broadly.

There’s yet to be signs of stockpiling by the industry. Panjiva’s U.S. seaborne import data shows that there’s actually been a downturn in imports of power generating and distributing equipment over the past year. Imports in Q2’20, through June 15, fell by 6.0% year over year following a 8.5% drop in Q1 and a 2.7% slip in 2019. 

That was somewhat better than the capital goods industry more broadly which has seen imports drop by 11.4% in Q2’20 as a result of COVID-19 disruptions. The power industry is likely less affected as its operations are deemed as essential. It’s lagged imports of energy extraction equipment though the latter may yet slump because of lower oil and gas prices.

ENERGY, POWER EQUIPMENT DOWNTURN SLOWED IN JUNE

Chart segments change in U.S. seaborne imports by GICS classification. Data for June shown for first half of month only. Source: Panjiva

Sourcing of solar power equipment does not appear in doubt. As flagged in Panjiva’s June 22 report there’s been a surge in supplies recently. While that’s been dominated by shipments by Chinese firms the manufacturing has occurred outside China.

Looking specifically at bulk-power products including generators and transformers, U.S. seaborne imports have been in decline with a 14.8% drop in Q2 following a 1.6% dip in Q1 and a 5.7% reduction in 2019.

Presuming policy is designed to reduce imports from China that may help importers from Europe and elsewhere – though earlier section 232 cases have included European supplies for tariffs too.

European suppliers have been picking up ground. Shipments from Europe rose by 38.8% in the 12 months to May 31 compared to 2016, including a surge in imports linked to Siemens, Vestas and Power electronics. 

Meanwhile imports from China only rose by 5.9% and those from Asia ex-China fell by 5.8%. The lack of a major rotation out of China would suggest tariffs under the section 301 program have not been set high enough to encourage bulk power equipment buyers to change their sourcing. The 29.5% year over year drop in shipments in March, likely linked to factory closures in China linked to COVID-19, may provide a more persuasive driver of “China+1” strategies for utility buyers.

TARIFFS TRIM, COVID-19 CUTS CHINESE POWER GEAR SUPPLIES

Chart segments U.S. seaborne imports of bulk electricity equipment by origin on a monthly and 12-month average basis. Source: Panjiva

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