Chinese manufacturers are continuing to suffer from the country's drop in demand with three quarters of listed companies predicting a steep decline in their performance forecasts for the first half of the year. Goldwind and Sinovel, the top two Chinese wind turbine makers, estimated over 50% profit decline.
In late June, Dongfang Electric saw CNY 3.6 billion ($570m) wiped off its market value, following reports that it had only sold 25 turbines in the first quarter, compared with 1,800 turbines a year in its heyday and 949 turbines last year. It was said to have over 500 turbines stockpiled, in addition to components for several hundred other wind turbines. But a spokesman for Dongfang denied that it had such a large stockpile. "The company has some products that have not yet met the requirements for sale, but when they do, they will be sold," he said.
The poor performance of turbine makers is attributed to slower wind farm construction in the country, which led to smaller orders and plummeting turbine prices from fiercer competition.
In April, the National Energy Bureau announced the second batch of wind farm projects for the 12th Five-year Plan period (2011-15), which totalled 14.92GW. This was nearly half the size of the first batch of 28.83GW projects, released in August last year. The Chinese government is trying to control the pace of wind farm construction to prevent it outpacing growth of the grid.
China will install about 15GW of wind turbines each year up to 2015 to meet the target of 100GW cumulative installed capacity. The country's capacity amounted to 29GW in 2011.
Leading turbine makers have been downsizing, curtailing expenses and closing plants. In May, Sinovel dismissed 350 graduates, 80% of the staff recruited for this year, covering customer service, research and development, marketing, management and project development.
Goldwind sold several subsidiaries to improve cash flow. In May, it signed an agreement to sell its blade plant in Jiangsu province to Sinoma for CNY 215 million.
In June, Goldwind sold 50% stakes of a wind power company in Inner Mongolia to China Three Gorges New Energy for CNY 127 million.
Other turbine makers, including Huayi Electric, have announced sales of their subsidiaries.
In May, AAVIC Heavy Machinery said it would sell 90% of its wind power subsidiary at a price of no less than CNY 110 million.
Many smaller manufacturers are trying to retreat before it is too late. Daiwei Wind Power Equipment, from north-east China's Heilongjiang province, has planned a sale, but has been unable to find buyers.
While most turbine makers are worrying, those that are subsidiaries of powerful state-owned power groups are happy.
In last year's public tender for 3.8GW wind power projects in Jiuquan, north- west China's Gansu province, most orders were taken by Guodian United Power, a subsidiary of Guodian Group, and China Creative Wind Energy, a subsidiary of Datang Group. Goldwind and Sinovel barely won any orders.
In the future, said Wu Gang, chairman of Goldwind, a large group of small turbine makers will be shut down or merged, because of pressures in capital, technology, cost and marketing. A few big turbine makers will dominate the scene in the end.
Manufacturers are using a variety of strategies to get through the downturn. Many are tapping the global market as turbines are sold 20-30% more expensive internationally than in China. Goldwind has seen the most success with this strategy, selling 220MW turbines overseas in 2011. It has 268.5MW orders from the US, Australia, Cuba, Pakistan and Cyprus and is planning to expand to Africa, South America and Asia in 2012.
But industry officials doubt whether Chinese wind turbine makers could edge into the leading overseas market in the short term, in the face of competition from GE, Vestas and Suzlon.
Manufacturing large capacity turbines for offshore projects is another popular tactic to find new markets - Sinovel and Guodian United Power have both developed 6MW turbines.
Other leading turbine makers, including Goldwind, Chongqing Haizhuang and Dongfang Electric, will produce 5-6MW offshore turbines this year.
Manufacturers are also expanding into construction of wind farms to ensure turbine sales. They are undertaking this new strategy independently or in cooperation with wind power companies.
Sinovel recently won approval from the Inner Mongolia government to construct a 45MW demonstration wind farm in the region, using 5MW turbines. Last year, it signed an agreement with Longnan municipal government to invest CNY 500 million to construct a wind farm in Gansu province, to generate 100 million kilowatt-hours a year. It has invested CNY 5 million to measure wind resources in four counties under Longnan city.
However, developing wind farms is not easy for wind turbine manufacturers because it is expensive and they need to sell them quickly in order to avoid heavy financial pressure.