Wind Turbine Stocks Hit by Rising Costs

Wind Turbine Stocks Sit Out Stock Market Rally

Vestas Wind Systems (VWDRY) and Siemens Gamesa Renewable Energy (GCTAY) have been left out in the wind during this year’s stock market rally. Supply chain slowdowns, rising commodity prices, and a decline in orders are keeping investors on the sidelines. Year-to-date, both Vesta Wind Systems and Siemens Gamesa Renewable Energy are down, underperforming the broader market.

Part of the decline in shares can be attributed to the bursting of the green stock bubble. Shares of clean energy stocks, including wind, had a strong run in 2020, but they have been selling off more recently. However, a bigger problem is rising cost inflation which makes it expensive for these companies to conduct business.

August Inflation Soars

Take the producer inflation index, which surged in August, as evidence. Prices producers get for their goods and services increased 8.3% year-over-year last month, marking the biggest increase in more than a decade. In July the index jumped 7.8%. The data point is dashing hopes inflation will ease as we move through the remainder of the year.

For Vestas Wind Systems and Siemens Gamesa, raw materials costs are hurting their bottom lines. In July, Siemens Gamesa said rising raw material costs will reduce its earnings by $271 million. The company has a multi-year order book, but because suppliers will only contract for as long as 15 months, it was exposed to higher raw material costs for newer projects.

Shipping Costs Weigh on Wind Turbine Makers

In addition to rising raw material costs, wind turbine companies are contending with supply chain delays and higher shipping costs created by the pandemic. In the past year, logistics costs, which account for 15% of a turbine’s price, have nearly doubled. Those inflated prices are expected to remain in place through 2021. In addition to that, the wind turbine companies are facing a lull in demand after a strong 2020 driven by the end of incentives in China and the US.

The wind turbine market has not participated in the stock market rally of 2021 as the industry faces a perfect storm of rising raw material costs, supply chain delays, and a slowdown in sales.

Things are changing daily within the financial world. Sign up for the SoFi Daily Newsletter to get the latest news updates in your inbox every weekday.

Sign up

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

All your finances.
All in one app.

SoFi QR code, Download now, scan this with your phone’s camera

All your finances.
All in one app.

App Store rating

SoFi iOS App, Download on the App Store SoFi Android App, Get it on Google Play

ABOUT Meg Richardson Meg Richardson is a writer specializing in markets, technology, and personal finance. She loves breaking down seemingly complex ideas and making them readable and interesting for everyone. She holds an MFA in writing from Columbia University. When she is not writing about finance, she enjoys running in Central Park and drawing cartoons.

TLS 1.2 Encrypted
Equal Housing Lender