The Zhitong Finance App learned that Guosheng Securities released a research report saying that according to incomplete statistics, it is initially clear that high-pressure/flexible transmission cables are used for a total of 29.1GW offshore wind power projects. Currently, companies that can produce high-pressure/flexible submarine cables are mainly leading manufacturers. Since submarine cables require 2-3 years of quality verification and capacity construction, etc., the competitive pattern of high-voltage/flexible submarine cables is expected to be stable for at least 2-3 years, and the overall profitability and value of submarine cables is expected to be maintained. The focus is on leading domestic companies such as Dongfang Cable (603606.SH), Zhongtian Technology (600522.SH), and Hengtong Optoelectronics (600487.SH), which have won bids for overseas submarine cables; second, domestic companies such as Sailing Cable (), Solar Cable (002300.SZ), Baosheng Co., Ltd. (USD), and Han Cable Co., Ltd. (002498.SZ) are expected to see high performance increases in the future. 605222.SH 600973.SH

Guosheng Securities's main views are as follows:

Submarine cables are the “blood vessels” of maritime electricity transmission. They are developing towards high voltage and flexibility

According to the function and location of the wind farm, submarine cables can be divided into array cables and transmission cables. Array cables are mainly used to collect electricity from wind turbines and transmit it to offshore booster stations, such as “capillaries”. Currently, the mainstream voltage level is 35 kV, and it is being developed to 66 kV. The transmission cable is used to transport electric energy after boosting to a land centralized control center, such as the “aorta”. Currently, the most common voltage level used is 220 kV, and it is being developed to 330 kV and 500 kV/flexible.

Technology, qualifications, and terminals to build high barriers to sea cables

1) Technology: Long-term installation under seawater requires high water resistance and insulation performance, so the technical requirements are higher. Deep ocean development is further testing the upgrading of submarine cable technology, and technological upgrades have increased exponentially in difficulty, and enterprises with higher voltage and flexible technology reserves are more competitive.

2) Qualification: Maintenance costs are higher after a single submarine cable accident. Owners pay more attention to submarine cable qualification verification and historical performance endorsement, so companies with rich experience in submarine cable delivery are more capable of receiving orders. At the same time, overseas orders require overseas verification and certification, and only those who pass the qualification have the opportunity to participate in the European submarine cable project bidding.

3) Wharves: In order to reduce the failure rate of submarine cables, submarine cables pursue continuous production and reduce the number of submarine cable interfaces, so that the weight of a single kilometer submarine cable exceeds 40 tons. Production equipment, plants, etc. must be built according to wharves to facilitate direct transportation of submarine cables through transmission belts to transport ship turntables for storage and delivery.

Domestic market, Haifeng will begin to accelerate construction in 2024

Guosheng Securities pointed out that since Q3 of 2023, the impact of restrictive factors has gradually been lifted, some breakthroughs have been made in the promotion of offshore wind power projects in coastal provinces, significant progress has been made in some projects, and the sea breeze project has accelerated. Construction of the three major projects in Jiangsu is expected to gradually begin at the end of Q2, and the second round of sea breeze competition is expected; Guangdong is expected to start construction of Qingzhou 567 and Fanshi 12 within the year. The Shandong market is growing steadily, and construction demand in Fujian, Hainan, Guangxi, Liaoning, and Hebei is expected to start in 2024. Overall, it is expected that in 2024, the sea wind will be connected to the grid for 10GW+, the offshore tender is expected to reach 15-20 GW, and the sea breeze is booming.

European seabreeze construction is ready, and demand for submarine cables is expected to spill over

WindEurope said that in 2023, Europe will complete an additional 30 billion euro investment in offshore wind power projects, setting a new record high in recent years. Considering the subsequent auction schedule for seabreeze projects by major overseas economies, Danish wind power operator Orsted (Orsted) estimates that overseas is expected to launch more than 40 GW of offshore wind project bidding and auctions in 2024. Orsted expects 2024 to usher in a centralized release of resources for overseas offshore wind power projects. In addition, in 2023, Vestas and Siemens Gamesa achieved a year-on-year ratio of +382.0% and +193.7% of new offshore wind power orders, both of which hit new highs in recent years. The project order area mainly came from the European market.

On the other hand, the three major overseas submarine cable giants surged in 2024Q1. Among them, Prysmian and Nexans submarine cables had orders of 131 billion yuan and 6.7 billion yuan respectively, up 58% and 10% from the end of 2023. The high increase in orders from overseas cable companies may lead to tight supply, and European orders are expected to spill out at home and abroad.

Risk warning: The development of the wind power industry falls short of expectations, the start of offshore wind power projects falls short of expectations, the risk of further intensification of industry competition, the risk of changes in raw material prices, and the risk of statistical and measurement errors.