SHANGHAI (Sept. 9, 12:05 p.m. ET) — For years, composites manufacturers have benefitted from China's bullish government policies on wind energy, windmill blade construction often making up the largest part of their business in China.
After a few years of unbridled growth, however, China's government is putting on the brakes and composites manufacturers are feeling the effects.
“Last year, China installed 17 gigawatts of new wind energy,” said Beth Rettig, spokeswoman for Owen's Corning. “This year they will maybe make it to 10.” At 7,500 tons of composite materials per gigawatt, Rettig said, the slowdown is going to impact the whole supply chain.
The slowdown in China is not limited to the wind market alone. At the recent China International Composites Industrial Technical Expo, held Sept. 7-9 in Shanghai, companies said they had seen slowing in the automotive market, in construction and in the manufacture of trains.
“We are doing well overall, business is up, but there has definitely been a slowdown,” said Dale Silvernell, the director of IDI Composites International's Asia Pacific supply chain. “The only market that's been unhampered by the slowdown is the metro system,” he said.
While different markets have cooled for different reasons, the dampened pace of growth can be traced back to government policies. In the real estate market, for instance, China's central government has put policies in place to help curb rising housing prices, limiting the number of home purchases that can be made by one buyer. Tightened lending policies and higher mortgage rates have put pressure on developers and slowed the typically lightening pace of construction.
In the rail industry, investment dropped following a deadly high speed crash in the Chinese city of Wenzhou. Following the crash in July, rail construction investment dropped 25 percent.
Of all the markets, however, wind has been the most acutely felt among composites manufactures. The strong, lightweight materials help increase the size of turbine blades, increasing the efficiency of the turbines. “We are seeing a lot of growth in wind in China,” said Christian Koppenberg, sales director at SGL Group, a manufacturer of carbon composites. “The European market is saturated; in China there is growth and there are new technologies being adopted—that's where you want to be.”
The slowdown in the wind industry has come after China encountered difficulties with its already installed wind power. Windmills on land are designed to turn only a percentage of the time, explained Sam Chi, the commercial director of global wind energy at Owens Corning. The electricity grid wasn't prepared for situations when all the turbines would turn at once and, when that happened, it created a power surge.
“I think they noticed this happening and realized that they need to improve the standards,” said Chi. Now, new turbines can no longer be approved locally, but have to go through the Central government. They are also required to include technology to protect against power surges. “From 2005-2009, the wind energy market grew incredibly fast,” Chi said. “Now we're back to 2009 levels.”
Chi predicted the slowdown will continue at least for another 12 months. In the meantime, companies are competing for a smaller market and looking to other applications to fill the gaps.
“We're not backing off even in light of the slowdown,” said Marcel Loyson, global business leader of Dow's Industrial Composites division. “We're still very committed to making more efficient blades for the China market.
“This is temporary,” Loyson said. “Globally, the wind market is only going to get larger.”