Builders wind turbines in heavy weather due to global shortages

Bottlenecks in logistics and soaring commodity prices are making it difficult to be profitable, two of the world’s largest wind turbine makers warned as they released their quarterly results this week.

Siemens Gamesa suffered a loss of 627 million euros in the past financial year, which ran through September. That came on top of the net loss of €918 million that the world’s largest manufacturer of wind energy turbines booked in the previous 12 months.

Steel more expensive

The Spanish-German group was troubled, among other things, by the fact that steel has become increasingly expensive in recent months. This is because the demand for metal has rebounded due to the economic recovery from the corona crisis. Parts have also become scarce.

Moreover, the same economic upswing is driving so much demand for freight transport that it has become much more expensive to move turbines to the right place.

The Danish concern Vestas reported this week that the same problems are affecting profitability. Operating profit, ie before payment of taxes and interest, was more than half lower in the third quarter than twelve months previously.

For the whole of 2021, the wind turbine manufacturer is lowering its profit margin expectations. This will probably be only half of what the group was counting on at the beginning of this year.

Foggy prospects

“Everyone is fighting with everyone to get raw materials and parts,” Vestas CEO Henrik Andersen described the problems. This struggle results in sharply peaking prices.

Siemens Gamesa CEO Andreas Nauen has no idea yet when the situation will return to normal, he said in an explanation of the figures. Siemens Gamesa also does not know when the problems will be over.

The problems come at the same time as world leaders in Glasgow are trying to reach new agreements on the fight against climate change. The switch from fossil energy to sustainable energy, such as wind energy, is important in this respect.

Margins were already low

This is not the first time that the profitability of wind turbine manufacturers has been under pressure, analyst Oliver Metcalfe told Bloomberg news agency. For this they had to compete fiercely on price, because costs are carefully considered when tendering for wind farms. “Margins have been squeezed for a number of years. The supply chain problems are making it all worse,” Metcalfe said.

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