{"id":85437,"date":"2019-04-22T10:30:50","date_gmt":"2019-04-22T14:30:50","guid":{"rendered":"https:\/\/\/?p=85437"},"modified":"2022-01-21T11:11:34","modified_gmt":"2022-01-21T16:11:34","slug":"mounting-racking-companies-develop-money-saving-practices-to-avert-cost-of-steel-tariffs","status":"publish","type":"post","link":"https:\/\/\/2019\/04\/mounting-racking-companies-develop-money-saving-practices-to-avert-cost-of-steel-tariffs\/","title":{"rendered":"Mounting, racking companies develop money-saving practices to avert cost of steel tariffs"},"content":{"rendered":"
The solar industry has endured not one, not two, but at least three direct tariffs for the last year on imported goods that are essential in the manufacturing and deployment of PV systems.<\/p>\n
In addition to tariffs on solar panels and Chinese inverters<\/a>, President Donald Trump\u2019s administration also imposed trade tariffs of 25% for imported steel and 10% on imported aluminum in early 2018 in an attempt to encourage the domestic purchase of these components and materials. The only countries exempt<\/a> from the steel and aluminum tariffs are Australia, South Korea, Argentina and Brazil.<\/p>\n Fabricated steel posts used for AP Alternatives mounting solutions are loaded onto a truck trailer. Josh Von Deylen, APA CEO, said after the steel tariff, the company has increased prices for all of its products, which all are manufactured in some part with steel. AP Alternatives<\/em><\/p><\/div>\n The new steel tax has caused solar mounting, racking and tracking companies to adapt and seek out savings. With the tariffs, Trump sought to amend what he believed was a trade deficit. Instead, officials from solar companies interviewed for this story reported an initial price increase of about 30% in domestically produced steel that has just now started to taper off one year later.<\/p>\n While inverters and modules are an obvious cost, steel is an overlooked aspect to solar arrays. It\u2019s the primary material used for fabricating mounting and racking products, and although the tariffs are supposed to expire \u2014 with no set end date \u2014 a lasting jump in price is attached to the metal. Procurement prices have risen both domestically and internationally for steel and racking, and mounting companies have tried to adapt to the added costs.<\/p>\n Working the market<\/strong><\/p>\n When the steel tariff was imposed in March 2018, projects that were on the table for fixed-tilt solar racking provider AP Alternatives<\/a> (APA) were put on hold. Every single APA product is made with galvanized steel that is mostly purchased in the United States. To account for the costs of the steel tariff, the company\u2019s mounting and racking products have increased in price by approximately 30%.<\/p>\n Aside from fabricating mounting and racking solutions, APA also offers installation services for its customers, many of whom are federal clients. These larger federal projects require all materials used to be manufactured and purchased in the United States under the Buy American Act.<\/p>\n \u201cRight now, we\u2019re in the process of doing all of our blanket orders \u2014 our large steel buys \u2014 pretty much for the year, because we don\u2019t really see an upward or downward trend that\u2019s going to be a big swing either way at this point,\u201d said Josh Von Deylen, CEO of APA.<\/p>\n AP Alternatives, a ground mount solar supplier, has weathered a year of steel tariff costs by making spot buys when the market is at a lower price or establishes a blanket cost. Blankets give companies with enough purchasing power to lock in a price in the market for a six-month period and a certain quantity of steel. AP Alternatives<\/em><\/p><\/div>\n With blanket orders, companies like APA \u2014 those that have large enough purchasing power \u2014 can lock a purchase price on steel for six months at a time. The buying company must also establish a quantity of steel and purchase that amount during the six-month period.<\/p>\n The blankets are a locked-in cost, even if a company issues one when the market is at a particularly low or high price point. It\u2019s an advantageous but risky buying ability for companies that attain steel in large enough quantities.<\/p>\n APA hasn\u2019t been able to use blanket pricing consistently since the steel tariff was enacted. However, for the last several months, Von Deylen said the steel market prices have slowly declined and remained predictable after peaking at the end of 2018.<\/p>\n \u201cBut that being said, our president can make one decision that could change things overnight, and that is what is very damaging,\u201d Von Deylen said. \u201cWhen it\u2019s something that we can predict, that we can see, that we can anticipate, that\u2019s good. It\u2019s just when drastic changes are made overnight, those are what really force everybody to scramble to come up with new plans.\u201d<\/p>\n Von Deylen said since the solar project cycle can last anywhere from two to 12 months, customers were returning after the tariff was in place to find their budgets had risen drastically.<\/p>\n \u201cThat\u2019s very detrimental to a solar project, so we put quotes out there at what steel was based on our blankets,\u201d he said. \u201cThen when steel jumped basically within two, three months just through the roof, it was detrimental to a lot of our customers and APA really had to work with them on how to distribute and mitigate costs in those areas. We even took lower margins on a lot of projects simply because these are long-term customers and the projects just couldn\u2019t pencil that pickup jump.\u201d<\/p>\n The prospect of tariffs caused a higher jump in steel prices than when the tariffs were actually implemented, Von Deylen said. When the tariffs were put in place for solar modules, prices started falling because companies finally knew what was going on and could plan ahead<\/p>\n \u201cThe main item with tariffs is actually the physical word itself: Tariffs,\u201d he said. “It\u2019s more of a scare for our industry than it is a major cost impact. You don\u2019t know how the industry is going to react. What\u2019s going to stop? What\u2019s going to be put on pause? How much is it going to actually scare the industry and shake it up?\u201d<\/p>\n But luckily, those projects that were stalled in 2018 are coming to fruition in 2019. Von Deylen said it\u2019s shaping up to be a record year, with projected output at quadruple last year \u2014 with some possible influence from the ramp-down<\/a> of the Federal Investment Tax Credit.<\/p>\n Domestic steel<\/strong><\/p>\n The intended purpose of the tariffs was to persuade companies to purchase steel from U.S. distributors. However, some solar mounting companies were already buying the metal domestically.<\/p>\n \u201cAn added tax is a constraint, business-wise. The more our customers have to pay for things is not good,\u201d said Ned Jansen, procurement manager at RBI Solar. \u201cNo one wants to pay more for anything that they do in their daily lives. It affects your disposable income. As a company, we\u2019d rather not have the tariffs be there. I think it would make it more advantageous for our customers to want to do more in the solar industry.”<\/p>\n