The EU launches an investigation into Chinese wind turbine producers

Julia Swales, Senior Editor at Ti and Advisory Board Manager for The Foundation for Future Supply Chain, spoke to Punit Oza, Founder and Director of Maritime NXT and asked him why the EU may impose a tariff on the export of wind turbines from China.

2023 was the best year on record for new marine wind power across Europe, trade body WindEurope has reported. A total of 4.2GW of offshore turbines, 1.7GW up on 2022, arose from Europe’s waters. 3GW was in the EU, an increase of 2.1GW year on year.

This is a huge industry and the import and export of the wind turbines has recently caused some controversy. Julia Swales, Advisory Board Manager for The Foundation for Future Supply Chain, spoke to Punit Oza, Founder and Director of Maritime NXT and asked him why the EU may impose a tariff on the export of wind turbines from China.

Most wind turbines and related project cargoes come from China into Europe. Wood Mackenzie has said that in 2023, they saw a threefold increase in imports into Europe, from China. They see that trend continuing because the cost of production in China is genuinely low and as economies of scale are kicking in, China can now go and service the lower end of the market too. For example, when producing 100 wind turbines for a customer, they can add another 10 and sell those to another customer at a good price. However, an EU investigation is putting a big spanner in the works.

The EU is investigating whether the Chinese wind turbine producers who are exporting into Europe are getting an extraordinary amount of state subsidies from the Chinese government. The Chinese envoy to the EU has said that they are very competitive in terms of their pricing because they have lower production costs and are more efficient and innovative than their competitors. It has nothing to do with state subsidies.

The EU has launched investigations like this in the past and taken action – it is one of the most proactive jurisdictions. The latest example was the investigation the EU launched into electric vehicles, which they felt were being heavily subsidized by the Chinese government. Eventually, they decided to put a tariff on the export of these vehicles – this is already in place.

So will they take similar action against the wind turbine producers? If the Chinese government is giving an unfair amount of subsidies to producers, this threatens the European producers of wind turbines, who can’t compete. That is coupled with the fact that Europe is trying to generate more renewable energy. If the EU’s intention is to try and reduce imports and promote European wind turbine producers, the wind turbines will have to be moved either by road or on a short sea route.

The mast of the wind turbine and the blades are not very heavy, but the actual rotor and the superstructure are weighty, therefore may have to be carried separately in a project cargo vessel, which has extremely heavy lift cranes of around 150 tons. Supplying thousands of wind turbines into different ports in Europe is a very lucrative business. The carrier is looking at a complete solution, so shipments will be divided between bulk carriers, project vessels and container vessels – this is all subcontracted to various carriers.

Geopolitically, there is a lot of change in Europe. In the recent parliamentary elections, the far right won a lot of seats in Italy and it seems to be going the same way in France, so some of the major importers are now looking at becoming more nationalistic in terms of their policies. This obviously points to the fact that they would support an internal rather than a global view and this may lead to tariffs.

Countries can’t start producing wind turbines overnight, it would be a three-to-six-month project. Even the tariffs would be progressive, so in the short term, there is likely to be a huge push from China, in case the tariffs kick in – they will exploit as much as they can and start pushing the market, so it could really go through the roof. Short sea routes within Europe will benefit and intra-Asia routes from China to other countries, but the long hauls will lose out.

If the European buyers are still keen to buy from China, in spite of the tariffs, they will simply have to pay more money for the Chinese goods, which is exactly what happened with America, when Trump imposed tariffs. Another effect could be retaliatory tariffs from China on goods coming from the EU, which is bad for world trade in general.

In conclusion, it’s clear that this is a fascinating space which needs to be watched very carefully, as in a tense situation like this, opportunities can come and go very quickly.

Author: Julia Swales

Source: Ti Insight / Foundation for Future Supply Chain

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