Wind turbine manufacturers are stepping up their efforts to outsource component production to third parties for leaner, more efficient operation. Currently this does not yet extend to relinquishing responsibility for overseas transport, but this might change if shipping costs start to rise.
Local production requirements attached to tenders for wind capacity in, for instance, Brazil may require assembly factories to be built in those markets. Where component supply has been outsourced to third parties, overseas transport of parts to the assembly factory or of blades to the wind farm site could also become the responsibility of the third-party manufacturer rather than the turbine builder. Such a strategy would make turbine manufacturers leaner and less vulnerable to fluctuating freight rates over the coming years. But for the time being at least, manufacturers seem to prefer to stay in control of the logistics.
Vestas divested or closed 12 out of 31 factories in a two-year turnaround plan to the end of 2013, with a growing degree of outsourcing. The measures included divestment of six machining and casting units producing rotor hubs and other components in Norway, Sweden, Germany, China and Denmark to private equity firm VTC Partners in 2013 for EUR 1 plus an earn-out element of up to EUR 25 million. VTC subsidiary and foundry owner Global Castings, now owns the production units. German turbine manufacturer Senvion is also on the list of Global Castings' customers.
Vestas declined to comment on whether the divestment cut its transport responsibility but Global Castings' European sourcing director Adrian Willetts says it "does not handle the logistics in the supply chain; this is normally handled by our customers".
German turbine maker Nordex has actually increased its need for ocean transport, having closed its US facility against the backdrop of the rollercoaster wind support developments there. Keeping a factory going with poor capacity utilisation stretched the resources of the medium-sized company to the point where it decided that refocusing on domestic facilities made more sense.
But in an announcement in May about new investment in a rotor blade factory at its Rostock works, Nordex noted that half the earmarked funds of up to EUR 50 million would go on its long-term "build-to-print" strategy - that is, outsourcing with design-specification contracts to international partners "to harness the cost advantages of international production facilities". There was no mention of the potential impact on logistics.
Nordex is currently benefiting from seagoing freight rates that, it says, are lower than they were five years ago. But with the freight trend towards recovery, higher transport costs may need to be planned for.
Global transport and logistics supplier DSV expects to benefit from "improved market conditions in the coming years" after the "tough market with low activity levels" of 2013. DSV acquired Seatainers, whose main business is transportation for wind projects, last year.
But the current over-capacity in the shipping markets makes any major price hikes unlikely. HSH Nordbank's Shipping Quarterly for Q2 of 2014 observed that, in the first months of the year, over-capacity remained a problem along with unexpected reductions in demand.
Rates for container transport remained stable in the first few months of 2014, but the sector is being hit by the effects of economic slowdown in countries including Brazil, South Africa and Russia, the report said.
The cost of ocean transport is based on factors that include weight, overall dimensions, equipment required and number of units, says Wallenius Wilhelmsen Logistics (WWL), which carried around 50 hubs and nacelles in 2013, mainly from Europe to North America. The company also carries components such as hubs and bedplates from Asia to North America, normally on roll trailers chosen to match customers' cargo. These can be rolled on board and inside the vessel. This allows smooth operation with limited lifting before rolling off at the port of discharge.
Transport of up to 20 nacelles is feasible, but shipments can be split, and WWL also offers storage at its base ports to ease the pressure on delivery to the port. "Very large spot shipments can be difficult as we are committed to many customers," says Henning Bree, WWL commercial manager. He says "reliable and frequent departures offer project managers the possibility to optimise their supply chain and cash flow, as they can continuously ship and commence work on the job site instead of waiting until production has finished the whole lot".
Cutting fuel costs
An exception to the outsourcing trend is German turbine builder Enercon, which has vertically integrated component production and is even developing and testing its own "E-ship" vessel aimed at reducing fuel costs. The vessel can carry 18 E-82 (2MW to 3MW) machines, including rotor blades and electronics units.
The E-ship allows operational fuel savings of up to 25% compared with similarly sized conventional freight vessels, according to Enercon. Using the so-called Magnus effect, the four Flettner cylindrical rotors provide the main engine with additional drive and account for more than 15% of the savings, it says.
First launched in 2010, the vessel re-entered service in February 2014 after a major overhaul. It has an annual fuel savings potential of up to 1,700 tons and CO2 savings of up to 5,100 tons. "With E-Ship technology, shipping companies could save up to $1.3 million in fuel costs annually," Enercon says.
In parallel, the company has developed the 3MW E115 turbine design so that all parts fit into standard 20-ft (6.1-metre) containers. The company says that no special transport support structures are required for the components, and the containers can then be used to transport any other goods, doing away with the need for them to be returned to the same factory for re-use. The 3MW E115 has started series production in mid-2014.
But there are trickier logistical challenges to be met. Transport of concrete tower components, for example, is laborious and costly, and to be avoided where possible by manufacturing close to the project. But Enercon, despite having tower factories in various countries, still has to deliver some tower segments from overseas.
As well as using its own E-ship, Enercon also has to charter vessels. It is clear that, with pressure to keep shipping costs under control, more manufacturers may have to consider handing over responsibility for transport to third-party companies.
CHOICES — DECISIONS ON VESSELS AND PORTS
Nordex uses multipurpose vessels with up to 14,000 deadweight tonnage (DWT) for intercontinental shipping, but also occasionally container and dry bulk vessels. For European deliveries, smaller units with up to 8,000 DWT are used, mainly Tweendeckers (cargo ships with two or three decks) but occasionally also single-deckers, it says. Standard containers can generally only be used for materials and tools needed for installation or for small turbine exterior components.
Nordex says vessels for European trips are usually booked short term for individual trips as a voyage charter. Intercontinental business is booked medium term, often for whole projects involving several transport deliveries and therefore several voyage charter agreements.
Port costs vary and the cost of a particular port has to be weighed against the transport costs on land. Using a cheaper destination port can be a false economy because of the long distance to the project site.