By Christoph Steitz
MUELHEIM AN DER RUHR, Germany (Reuters) – Europe’s energy sector relies too much on China to entertain the idea of de-risking, the CEO of Siemens Energy said, reflecting the dilemma of an industry in need of supplies from the world’s No.2 economy – but not the competition that comes with it.
The comments by Christian Bruch come as global trade tensions with China are heating up, with the U.S. raising tariffs on Chinese electric vehicles this week and the European Union looking into similar steps to protect local players from unfair competition.
Meantime, the EU has launched an investigation into Chinese wind turbine makers and whether they benefit from subsidies in their efforts to undercut the pricing of Western companies like Vestas, Nordex and GE Vernova.
“The last thing I would do is advocate something like departing or de-risking. We have a connectivity between the two regions that is fruitful and unavoidable,” Bruch told a briefing with journalists this week.
“Trying to build a wind turbine without any Chinese supply will be close to impossible. Energy transition without China doesn’t work.”
The manufacturing of wind turbines heavily depends on materials from China, most notably rare earths and permanent magnets and there are limited options for the sector to change that, usually at much higher prices.
While Siemens Energy makes only a fraction of its sales in China, around 1.5%, its wind division relies almost entirely on rare earth and permanent magnets from China.
Bruch’s comments also indicate a divide between Germany’s government, which has suggested companies cut their relative exposure to China, and the leaders of companies such as Volkswagen and BASF, which have increased their engagement.
LEVEL PLAYING FIELD
Bruch said it was vital that Chinese wind turbine makers be held to the same local standards as European companies when they sell their turbines locally, adding there had to be a middle ground between full-on protectionism like in the United States and a free market.
“I’m not in favour of blocking the European market. But I think we still need clear rules in terms of how companies are financed, where do they get guarantees from and what do they pay for it. This needs to be somewhat consistent,” Bruch said, adding he hoped that the EU investigation would achieve this.
Siemens Energy last week announced far-reaching changes to its crisis-ridden wind turbine division, including cutting or paring back the number of markets where it wants to compete, such as Latin America and Africa, which is partly a consequence of cheap Chinese competitors.
Bruch said wind unit Siemens Gamesa would not compete in markets where it was up against two or three Chinese players if price was the only differentiator.
He said that while the company had weighed an exit from onshore wind, which has been plagued by quality issues, Siemens Energy had decided against it for now because it would have been more expensive than staying in.
Bruch made clear, however, that the turnaround plan for onshore, which includes a target for double-digit profit margins, had to produce tangible results within the next 4-5 years or a different solution would have to be found.
(Reporting by Christoph Steitz; Editing by Susan Fenton)
