Guosheng Securities: The demand for the European offshore wind foundation market is on the rise, and Chinese wind turbines have a significant price advantage

According to the Zhitong Finance APP, Guosheng Securities has released a research report stating that the global offshore wind is entering a growth cycle, with Europe being the main direction for the offshore wind market. Both offshore wind and power interconnection require submarine cables for support, with power interconnection using flexible direct current submarine cables, while offshore wind, due to deep sea and large-scale development trends, is advancing submarine cable technology towards high voltage and flexible direct current. The European offshore wind fundamental market is currently in a phase of rising volume and price, with demand sentiment on the rise. Under the current circumstances, the price of Chinese exported wind turbines in overseas markets is 19-24% lower than that of Western wind turbines, giving them a significant price advantage.

The main points of Guosheng Securities are as follows:

Global offshore wind is entering a growth cycle, with Europe as the main direction for the offshore wind market

Recently, with the EU's interest rate cuts and continuous decline in raw material prices, European offshore wind is expected to accelerate starting in 2025, with forecasts of 4.5/8.4 GW of installed capacity in Europe in 2025/2026 respectively; originally, it was expected that the installed capacity of European offshore wind would decline year-on-year in 2027/2028, but considering that the UK, Poland, and Germany will lead European FID growth to reach 9.5 GW in 2025, and taking into account a preparation period of 2-3 years, European offshore wind is expected to reach 10 GW in 2027/2028, achieving continuous high growth, thus entering a growth cycle. In addition, offshore wind in Japan and South Korea is accelerating, with tenders for offshore wind expected in 2025. Looking ahead to cutting-edge technology, floating wind power technology is expected to enter the commercialization process in 2028, with Europe and Asia-Pacific remaining the main markets.

Submarine cables: High demand for offshore wind and power interconnection, with a shortage of local capacity in Europe

① Offshore wind: The demand for offshore wind in Central Europe, Japan, and South Korea continues to grow significantly. According to GWEC data, the global offshore wind installed capacity is expected to have a CAGR of 27% from 2024 to 2030; ② Power interconnection: Global submarine interconnection projects are mainly concentrated in Europe, with the European Network of Transmission System Operators for Electricity (ENTSO-E) planning a capital expenditure of €400 billion for offshore power interconnection by 2050, including approximately €120 billion for offshore and onshore direct current cables. Both offshore wind and power interconnection require submarine cables for support, with power interconnection using flexible direct current submarine cables, while offshore wind, due to deep sea and large-scale development trends, is advancing submarine cable technology towards high voltage and flexible direct current. NKT, Nexans, and Prysmian, as companies in the European submarine cable industry, are currently facing a surge in orders and tight capacity, with order delivery cycles generally extended to around 2030; even considering that capacity expansion is expected to be gradually released between 2025-2027, it will still be difficult to meet the growth rate of order demand.

Offshore wind foundations: Local capacity in Europe is tight, and orders are entering a price increase cycle

The prices of overseas towers and piles, as well as interest rates, far exceed those in the domestic market, making Europe the direction for the growth of offshore wind foundations. Currently, local offshore wind foundation capacity is expected to enter a state of shortage around 2027, coupled with a slow pace of local capacity expansion, the actual shortage period is expected to be further extended. The capacity shortage leads to price increases; for example, local company SIF has seen its average sales price per pile increase by 13% and 10% year-on-year for 2023-2024, marking two consecutive years of increases. Therefore, the European offshore wind foundation market is currently in a phase of rising volume and price, with domestic DHI starting to accelerate the delivery of European orders and new projects from 2025, which can verify the rising demand sentiment in the European offshore wind foundation market Main Engine: With a Price Advantage Moat, Mingyang Smart Energy Takes the Lead

Europe will still be the main incremental market for offshore wind power overseas in the next decade. However, due to local developers continuously facing rising project development costs and insufficient local supply chain capacity to deliver on time, Chinese exported wind turbines currently have prices that are 19-24% lower than those of Western turbines, providing a significant price advantage. Currently, Mingyang Smart Energy has taken the lead in entering the European market, having secured an order for 16 units of 18MW turbines for a 270MW project in Germany, and has reached an MOU with the Italian government and Renexia to provide 18.8 MW offshore wind turbines for a large Mediterranean offshore wind project.

Investment Recommendations

For submarine cables, Dongfang Cable and Zhongtian Technology have already entered the European market and are expected to gain order increments amid local capacity shortages in the medium to long term. For monopiles, we remain optimistic about DHI's subsequent order deliveries and accelerated implementation, showing a good trend of performance and order fulfillment. Additionally, pay attention to Tianshun Wind Energy, which has a factory layout in Europe, as local layouts are more likely to obtain product qualification certifications and owner certifications compared to direct exports from China; and HAILI WIND POWER, which is expected to initiate overseas owner factory inspections. For main engines, focus on Mingyang Smart Energy, which has already secured local orders in Europe, and Mingyang Electric, which is expected to follow Mingyang Smart Energy in exporting offshore wind transformers.

Risk Warning: Offshore wind power demand may fall short of expectations, affecting the industry's development process; the overseas wind power market may strengthen trade barriers against Chinese companies, hindering the export of China's wind power industry chain; offshore wind unit profitability may not meet expectations, leading to underperformance in offshore wind results