SEAL BEACH, Calif. One of steel plates most important emerging markets is bracing for a "significant" drop in the fourth quarter due to the threat of a year-end tax credit phaseout thats already causing cutbacks, according to an executive of SSAB Americas.
Jeffery J. Moskaluk, chief commercial officer of the Lisle, Ill.-based plate producer, told an Association of Women in the Metal Industries meeting that the end of a tax credit for renewable energy production could put a serious dent in the construction of wind turbine towerspossibly by as much as two-thirds, according to some wind energy industry studies.
Federal legislation due to expire Dec. 31 provides an income tax credit of 2.2 cents per kilowatt-hour for the production of electricity from utility-scale wind turbines.
Although various proposals have been made in Congress to renew the credit, action isnt expected until after the presidential election in November.
A wind tower typically consumes some 120 tons of platelargely Grade 50 high-strength, low-alloy steeland at a conservative estimate the sector represents an annual market of 600,000 to 700,000 tons, Moskaluk said. Uncertainty about the tax credit extension could reduce market consumption to 50,000 tons or less in the fourth quarter from around 150,000 tons.
But Moskaluk, who was also interviewed briefly after his presentation, pointed out that the damage in terms of the rest of the year has pretty much already been done.
Wind towers not built by August or September arent likely to qualify for the credit, since the projects must not only be built but also installed and in operation by the end of the year.
Moskaluk noted that Otter Tail Corp. of Fergus Falls, Minn., agreed to sell assets of its DMI Industries unit to Dallas-based Trinity Industries Inc. earlier this month.
Otter Tail said that the market value for DMIs assets had been significantly impacted by reduced demand for wind towers due to adverse market conditions affecting the industry. Among those factors was uncertainty about the renewal or extension of the tax credit.
Separately, Munich, Germany-based Siemens AG said this past week it would release about 615 workersmore than one-third of its U.S. wind power employeesin Fort Madison, Iowa; Hutchison, Kan.; and Orlando, Fla.
"Uncertainty" about the fate of the tax credit was one reason cited in an announcement by subsidiary Siemens Energy Inc., along with the growth of competitive natural gas power generation and a "still-lingering" recession.