China’s Wind Turbine Makers Face Market Consolidation

April 18, 2014 by  
Filed under Green Energy News

Consolidation may cut the number of
wind turbine makers in China, the world’s largest wind market,
by two thirds in the next five years as oversupply pressures
grow, according to an industry association.

The shakeup, which could leave China with as few as 10
turbine makers, means those with more advanced technology stand
the greatest chance of surviving, Shen Dechang, vice secretary-general of the Chinese Wind Energy Equipment Association, said
in an interview. Xinjiang Goldwind Science Technology Co. (2208) will
grow steadily while Sinovel Wind Group Co. (601558) and Dongfang Electric
Corp. (600875)
will fall behind, Shen predicts.

“Given that China only adds as much as 20 gigawatts of
wind power annually, capable companies which stand out after
years of competition will attract more orders,” forcing out the
weaker ones, Shen said.

A contraction would represent a challenge to efforts by
Denmark’s Vestas Wind System A/S (VWS) to boost market share. Foreign
turbine makers may see their portion of the market fall to as
little as 1 percent from about 5 percent now, Shen said.

“Even as the current wind power market rebounds slowly,
industry competition is still very intense” so that
manufacturing companies don’t have sufficient profitability, Ma Jinru, a Goldwind spokeswoman, said by email.

Two calls to Sinovel media manager Bao Zhen seeking comment
were unanswered. An e-mailed message to Dongfang Electric’s
investor relation’s department wasn’t immediately returned.

Equipment Glut

An equipment glut has driven turbine prices down 23 percent
from 2009 levels and trimmed margins, according to Shen’s
organization, which acts as a bridge between China’s government
and producers of wind equipment. Supply outstripped demand by 40
percent at the end of last year, according to Bloomberg data.

“This rate may fall to 35 percent in two or three years as
shutting or integrating some companies eliminates capacity,”
said Zhou Yiyi, a Beijing-based analyst from Bloomberg New
Energy Finance.

Goldwind was the biggest turbine supplier to China in 2013,
followed by Guodian United Power Technology Co. and China Ming
Yang Wind Power Group Ltd. Sinovel fell to seventh from third in

The 10 largest makers of wind equipment in China last year
accounted for 78 percent of a market where capacity last year
grew 16 gigawatts, according to data from the wind energy

Vestas’s Agenda

Vestas Chief Financial Officer Marika Fredriksson told the
Copenhagen-based newspaper Borsen this week that the company
puts China at the top of its agenda.

Vestas, which returned to profit in the final three months
of last year after nine quarters of losses, was the 11th largest
supplier of wind equipment in China in 2013 and the top foreign
supplier, according to the wind energy association.

Foreign competitors are less flexible and slow to customize
products for China, while their emphasis on quality leads to
higher prices of their products, said Zhou.

“The market will further concentrate as other producers
quit,” said Lai Shensheng, a Shanghai-based analyst at Capital
Securities Corp.

Beijing-based Goldwind will account for 30 percent of the
market by 2017 from 23 percent now, Lai forecasts.

Policy makers in China are dealing with increasing strains
in the financial system after years of debt-fueled economic
growth. A provincial court accepted restructuring applications
from manufacturer Shandong Changxing Group and its three main
units under China’s bankruptcy law on March 28, two government
officials with knowledge of the matter said on April 11. Bad
loans held by the group are related to its wind power projects,
according to the officials.

“Companies with less competitive technology and quality
will die and their market share will be carved up by several
rivals,” said Jerry Weng, a Shanghai-based analyst at KGI
Securities Co.

To contact Bloomberg News staff for this story:
Feifei Shen in Beijing at

To contact the editors responsible for this story:
Reed Landberg at
Iain Wilson

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