Chinese Wind Tower Companies Latest to Be Hit by U.S. Tariff

It was only a few weeks ago that the U.S. Department of Commerce announced plans to slap duties on Chinese solar panel manufacturers. On May 30, the Commerce Department followed suit by announcing plans to tax Chinese manufacturers of towers for wind turbines after determining that they receive unfair government subsidies, according to the New York Times (http://www.nytimes.com/2012/05/31/business/energy-environment/us-imposes-duties-on-chinese-wind-towers.html?partner=rss&emc=rss). The proposed duties range from 13.7 to 26 percent, according to the Times article.

While all the major news outlets covered the story, there are several reasons why the wind tower stocks didn’t really rally on the news. First, the entire market is in the midst of a serious slump: The month of May saw Nasdaq dip 7.2 percent, Dow drop 6.2 percent and the S&P 500 decline by 6.3 percent. Second, as noted by Forbes, most of the wind tower stocks aren’t “pure plays” (http://www.forbes.com/sites/tomkonrad/2012/05/31/us-imposes-tariff-on-chinese-wind-towers-why-wind-tower-stocks-are-down/).

We covered a few randomly chosen companies in the wind power space last October. Here’s a comparison of then and now, as of close of market June 1.

China-based China Ming Yang Wind Power Group Ltd. (NYSE: MY, http://www.mywind.com.cn/) makes, services and sells wind power turbines in China, which means they may be the focus of a tariff. Formerly China Wind Power Equipment Group Ltd., the company’s  market cap dipped from $334 million in October to $165 million currently. Daily trading volume dropped from about 170,000 shares a day to 145,000.  Its stock has gone from about $14 in late 2010 to $2.45 on Oct. 7 and closed at $1.35 June 1, down 10 cents on the day.

Ann Arbor, MI-based Kaydon (NYSE: KDN, http://www.kaydon.com/) makes parts such as custom bearings for windmills. In 2008 they built a manufacturing facility in Monterrey, Mexico devoted to servicing the wind energy industry. On Aug. 9 2011 KDN was trading for $32.48, dropped to $28.81 on Oct. 7 and closed June 1, 2012 at $21.79, down 52 cents on the day. It trades about 375,000 shares a day.

St. Louis-based Zoltec Companies (Nasdaq :ZOLT, http://www.zoltek.com/) was mentioned in an Investopedia article as another way to play the wind energy market (as was Kaydon and Ming Yang Wind Power Group). ZOLT makes carbon fibers used to reduce weight in turbine blades so they spin faster and recently won a $3.7 million grant from the US Department of Energy for carbine fiber research. If you go back to February 2011 its stock was trading at $16 but had dropped to $5.93 by Oct. 7. It closed at $7.95 on June 1 2012, down 40 cents on the day.

Another way to look at this market is through two ETFs that offer a group of wind energy companies to invest in. They include PowerShares Global Wind Energy (Nasdaq:PWND), which dropped from $7.09 last Oct. 7 to close at $5.10 on June 1, down 15 cents on the day (52-week range is $5.18-$10.38) and First Trust Global Wind Energy (NYSE: FAN) which closed Oct. 7 at $8.31 but had dropped to $5.89 (52-week range is $5.92-$11.18).

Advertisements

Wind Power Market Expanding While Wind Power Stocks Weather the Storm

Of the alternative energy sectors, wind power seemed to be getting the best headlines in recent weeks. First came the report from Pike Research Oct. 3 that government incentives and “an expanded awareness of small wind technologies as an alternative source of electrical power” will help double the global small wind power market to $634 million by 2015. The report adds that the payback period for “a small wind system can be 5 to 10 years in a region with adequate wind resources.”

The came the report in the Los Angeles Times that “Kansas is to wind as Saudi Arabia is to oil,’ noted in a story focused on British Petroleum’s plans to build an $800 million, 252-turbine wind farm in the state (http://latimesblogs.latimes.com/nationnow/). The farm is called Flat Ridge 2 and will sprawl out on 66,000 acres. BP Wind Energy is expected to start constrution this year and complete the project by 2013. An estimated 500 construction jobs will be generated. The 200 landowners whose property will be part of the farm will get $1 million a year for 20 years. Local governments will also get funded.

More wind news came last Sept. 20 in the Wall Street Journal where it was reported that a Chinese wind turbine maker, Xinjian Goldwind Science and Technology Co. (China’s second largest wind turbine producer judging by new capacity sold, according to the WSJ), has plans to build a $200 million wind farm in Illinois. Gov. Pat Quinn’s office suggests that the project will generate more than 100 construction jobs and about 12 permanent ones (http://online.wsj.com/article/SB10001424053111904106704576579741179230646.html?KEYWORDS=brian+spegele+xinjiang).

Is this kind of good news doing anything to bolster smallcap wind power-related stocks? Like most small caps in this market, they’ve been beaten down, but at some point they will have bottomed out. We’ve been following a few (please send us any others you can suggest). They include:

China-based China Ming Yang Wind Power Group Ltd. (NYSE: MY, http://www.mywind.com.cn/) makes, services and sells wind power turbines in China. Formerly China Wind Power Equipment Group Ltd., the company has a market cap of $334 million and trades about 170,000 shares a day. Investopedia recently named it one of five wind energy stocks to watch. Its stock was more than $14 about a year ago but has dropped considerably, closing Oct. 7 at $2.45, down 21 cents on the day.

Ann Arbor, MI-based Kaydon (NYSE:KDN, http://www.kaydon.com/) makes parts such as custom bearings for windmills. In 2008 they built a manufacturing facility in Monterrey, Mexico devoted to servicing the wind energy industry. On Aug. 9 KDN was trading for $32.48. It closed Oct. 7 at $28.81, down 92 cents on the day. Its 52-week range is $26.45-$41.71.

St. Louis-based Zoltec Companies (Nasdaq :ZOLT, http://www.zoltec.com/) was also mentioned in the Investopedia article as another way to play the wind energy market. ZOLT makes carbon fibers used to reduce weight in turbine blades so they spin faster and recently won a $3.7 million grant from the US Department of Energy for carbine fiber research. Its stock closed at $5.93, down 28 cents on Oct. 7 but was a high as $16 in February.

Another way to play might be two ETFs that offer a group of wind energy companies to invest in. They include PowerShares Global Wind Energy (Nasdaq:PWND), which closed Oct. 7 at $7.09, down 15 cents (52-week range is $6.63-$11.76) and First Trust Global Wind Energy (NYSE: FAN) which closed Oct. 7 at $8.31, up 1 cent (52-week range is $7.59-$12.28).