Supply chain issues remain – Make

Shifting demand and oversupply of critical wind turbine components continue to challenge the global wind supply-chain, according to new research from Make Consulting.

Make’s Global Wind Turbine Supply Chain 2014 report reveals that the supply of blades, nacelles and gearboxes is approximately 50%, 80% and 90% in excess of global demand, respectively.

However, the report says facility closures and market exits – brought about by volatile demand and intense price competition – have closed the supply-demand gap over the last 12 months.

Make says the divestment of non-core production assets and an increased focus on the higher-margin-yielding operations and maintenance business has allowed several turbine original equipment manufacturers (OEMs) to return to profitability in 2013.

It says turbine OEM profit margins have been highest for tier-one Chinese OEMs, which enjoyed double-digit margins compared to the single figures posted by western competitors.

According to the report, western turbine OEMs and subcomponent suppliers have been forced to adjust sourcing and production strategies to follow shifting global market dynamics.

Make says the allure of new growth markets is enticing, but meeting local-content rules remains a critical challenge.

Several turbine OEMs have struggled to maintain profitability with multiple production facilities across the globe, driving some to concentrate production at centralised facilities in their home markets to benefit from increased economies of scale.

The report adds that diversified regional exposure is important to mitigate foreign exchange risks, address annual demand fluctuations and meet local-content rules in emerging markets such as Brazil.

Other emerging local content markets such as Russia, Ukraine and Saudi Arabia show promise, but the report says lack Brazil’s upside. Make says it does not expect substantial near-term investments by foreign suppliers in these markets.

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