The Chinese ambition for growth
Up to now, the Chinese economy has consumed all that it can produce, but we believe this situation is about to change as the Chinese economy slows.
The Chinese economic miracle witnessed over the last decades has been tremendous and hard to comprehend in terms of scale. The Chinese economy has been driven by exports, primarily for consumer goods. Exports of breakbulk cargo, on the other hand, have not risen by the same amount. Why is this the case?
Up to now, the Chinese economy has consumed all that it can produce, but we believe this situation is about to change as the Chinese economy slows. This will mean that its ambition for growth must be met outside its home market.
Consequently, we expect China’s demand for project cargo to grow significantly over the next few years, and there will be an increasing need for project logistics services in China from around the world. The wind energy sector is a good example of this trend, but other similar cases can be found in transportation and other energy sectors.
As stated in China’s 13th Five-Year Energy Plan, the government aims to reduce wasted wind energy and phase out subsidies for onshore wind power development. These objectives are expected to result in a slowdown in production of new wind installations in China over the next five years. This will increase pressure on the wind makers and their reliance on overseas markets as a substitute for the stagnant domestic market.
Today, five of the top 10 wind manufacturing companies are Chinese and are active in overseas markets. One example is Goldwind, one of the world’s largest turbine makers.
Today, five of the top 10 wind manufacturing companies are Chinese and are active in overseas markets. One example is Goldwind, one of the world’s largest turbine makers. At the end of 2016, it reached 2 gigawatts in international contracts and delivered more than 700 units of wind turbine generators across six continents and 20 countries, including the U.S., Panama, Turkey, Chile, Australia and Thailand.
Nevertheless, despite this growing Chinese presence, multinational wind turbines makers are ahead of their Chinese competitors with a wider global coverage and consolidation activities, for example the merger of Siemens Wind Power and Gamesa. We believe that the Chinese will be very keen to close this gap and increase their presence and global competitiveness.
In order to increase competitive advantage in the overseas wind market, logistics excellence will be the key for Chinese makers. Cargo for wind energy equipment can be very large and heavy, with pieces in excess of 300 tonnes. Such cargoes require in-depth logistical experience and tailored equipment to ensure safe and secure transportation. Any delay in shipment or cargo damage can result in significant increase to the total cost and disruption to the global business.
To avoid this, original equipment manufacturers must partner with experienced logistics expertise. This will create opportunities for logistics companies who have a strong base in China and abroad and are experienced in handling large and heavy breakbulk project cargo, not only in the wind energy market, but in the wider breakbulk space over the coming years.
This article first appeared in Breakbulk magazine, breakbulk.com.