Power Struggles Behind the Front (II)
An increasing number of German companies expand their presence in the USA – at the growing expense of German production sites. US reindustrialization goes hand in hand with Germany’s deindustrialization.
WASHINGTON/BERLIN (Own report) – An increasing number of German companies are expanding their presence in the United States – at the growing expense of production sites in Germany. On the one hand, the causes are huge investment programs in the USA, and on the other, the consequences of Western sanctions aimed at “ruining Russia” (Annalena Baerbock). Since last year, Washington has started economic stimulus measures, some in the triple-digit billions, to induce German companies to set up production sites in the United States. Because of subsidies offered in the USA, the Northvolt company is considering suspending its plans to build a battery factory in northern Germany and instead to build a plant in North America. At the same time, the existence of energy-intensive industries is being jeopardized in Germany, due to the currently high energy prices. The threat of their relocation abroad – particularly to the USA, where energy prices are significantly lower – is tangible. Thus, the US reindustrialization goes hand in hand with Germany’s deindustrialization.
Promoting Production Sites
The growing tendency of German companies establishing production sites in the USA is not new. For years, the United States – particularly individual states – have been campaigning for new German industrial investments. The USA’s reindustrialization is not only aimed at increasing wealth, but also at achieving a largely autonomous industrial production to be as independent as possible in the face of the escalating global power struggles, without too much having to consider other countries. The southern states of the US are taking a particularly offensive approach. According to reports, the US state of Georgia is active to attract potential investors not only by sending government members to Germany. It is also granting attractive tax breaks, assisting in choosing production sites and training employees and is even sending personnel to Germany to prepare training measures.[1] Numerous German companies have already decided to relocate to Georgia, for example, Hamburg’s Aurubis AG, which announced in November 2021 that it will invest $340 million in a smelting facility for multi-metal recycling in that state.[2]
Billions in Subsidies
Washington is intensifying its efforts to attract foreign companies’ production facilities to the USA with major investment programs in the double- and triple-digit billions, launched by the Biden administration. In November 2021 the $1.2 trillion Infrastructure Investment and Jobs Act was enacted, which will finance, for example, the expansion of roads, bridges, and ports, as well as the construction of charging stations for electric vehicles. The Inflation Reduction Act, adopted in August 2022, provides around $200 billion for decarbonization as well as green energy. The Chips and Science Act, also enacted in August 2022, provides around $52 billion for the restoration of US semiconductor production. As a rule, only those products may be used, which are, to a certain extent – usually high extent – made in the USA. Setting up production sites in the United States will thus become even more attractive. In view of the US infrastructure program, Siemens, for example, had already announced in August 2021, that it would bolster its EV charging manufacturing in the United States.[3]
Texas Rather Than Berlin
With its investment programs, Washington is even partially succeeding, in thwarting or completely jeopardizing scheduled and already launched investments in Germany. It became known in September that Tesla is slowing the expansion of battery production in Grünheide, near Berlin. For the moment Tesla prioritizes production in the USA, where electric cars are heavily subsidized within the framework of the above-mentioned investment programs – but only if the batteries are also produced in the United States.[4] According to reports Tesla is thus transferring all available machines needed for the crucial production operations to its plant in Austin, Texas. Grünheide must wait.[5] A similar scenario is developing in regards to the battery factory, the Swedish Northvolt company which was planning to set up in Heide (Schleswig-Holstein). A declaration of intent has already been signed and the final decision had been announced for the summer. However, Northvolt CEO Peter Carlsson has now confirmed that the plant may be postponed for years – in favor of a production site in the USA. Carlsson gives two reasons. First, the US investment programs offer government subsidies of 600 to 800 million dollars. In Germany, Northvolt receives 155 million euros.[6]
Threatened with an Exodus
The second reason why Northfolt is considering to prioritize a plant in the USA, rather than in Germany: The prices of not only natural gas, but also of electricity have risen to such an extent in Germany that they are currently a multiple of that in the USA due to the threatening – and already imposed – sanctions on Russian energy supplies. Meanwhile the first energy-intensive industries have already been either partially or completely shut down. The steel manufacturer ArcelorMittal, for example, has noticeably scaled back its activities in several of its plants and short-time has been considerably expanded.[7] SKW Piesteritz, the producer of nitrogen fertilizers and a major supplier to numerous industries has suspended production. Northvolt CEO Peter Carlsson warns: “With the current price of electricity, the economic viability of energy-intensive projects in Germany are at risk.”[8] Ex-Ruhrgas CEO Burckhard Bergmann makes the diagnosis: “Germany’s primary industry, as far as it is natural gas-intensive, is in a difficult situation.”[9] In late September, Jörg Kukies, State Secretary in the Chancellery openly admitted: “Germany is threatened with an exodus of important industries.”[10] Thanks to its relatively low energy prices, the USA would be the main beneficiary.
US Fracking Industry’s Main Financier
The United States thus benefits doubly from the high energy prices in Europe – first in the form of energy-intensive industries being set up in the United States rather than in Europe and secondly with the sale of huge volumes of liquified gas to the European continent. The volume of US natural gas that has been delivered to Europe since January in liquified form has risen to almost 40 billion cubic meters. The US Cheniere company has decided to build a new gas liquefaction facility for $8 billion, to meet the anticipated high demand in Europe. Cherniere is investing, assuming gas prices in Europe remain high enough, Corey Grindal, executive vice-president in charge of worldwide trading at Cheniere announced.[11] Recently, a study showed that the USA, by far, will most likely become Europe’s most important natural gas supplier by 2030 – with an annual volume of 170 billion cubic meters. This is significantly more than Russia supplied in 2021 (155 billion cubic meters).[12] With these high prices, the EU countries are financing not only the US fracking industry, but indirectly also the exodus of segments of their industry to the USA.
For more on the subject see: Power Struggles Behind the Front.
[1] Felix Holtermann: Deutsche Unternehmen bauen ihre Standorte in den USA immer weiter aus. handelsblatt.com 29.09.2022.
[2] Gov. Kemp: Aurubis to Open State-of-the-Art Recycling and Copper Smelting Facility in Augusta. gov.georgia.gov 10.11.2021.
[3] Siemens plant Ausbau der US-Produktionskapazitäten für Ladegeräte. electrive.net 27.08.2021.
[4] Silke Kersting, Dietmar Neuerer: Nach neuem US-Gesetz: Tesla stoppt vorerst seine Batteriefabrik in Grünheide. handelsblatt.com 15.09.2022.
[5] Thomas Jahn: Warum der Autobauer noch keine Batteriezellen in Grünheide baut. handelsblatt.com 14.10.2022.
[6] Marcus Theurer: Vorfahrt für Amerika? Frankfurter Allgemeine Sonntagszeitung 30.10.2022.
[7] Hamburg: Im Stahlwerk geht der Ofen aus. ndr.de 07.10.2022.
[8] Marcus Theurer: Vorfahrt für Amerika? Frankfurter Allgemeine Sonntagszeitung 30.10.2022.
[9] „Putin war bestens informiert”. Frankfurter Allgemeine Zeitung 01.11.2022.
[10] Felix Holtermann: Deutsche Unternehmen bauen ihre Standorte in den USA immer weiter aus. handelsblatt.com 29.09.2022.
[11] Frédéric Simon: Top US gas exporter eyes Europe growth, ‘with the right contracts’. euractiv.com 31.10.2022.
[12] See also Die Flüssiggas-NATO.
