According to the IMF, GDP grew by 3.3% in 2014. The uncertainty over global economic development continues. GDP growth is expected to remain broadly stable in the emerging markets and developing economies in 2015. Although forecasts have been revised downwards, these economies will continue to account for the bulk of global growth. Over 50% of the Wärtsilä’s net sales came from non-OECD countries in 2014. In advanced economies the stronger than expected recovery in economic growth in the US is expected to continue.
Demand in Wärtsilä’s end-markets is largely driven by GDP development. In the power generation markets, macroeconomic uncertainty and slower global growth projections continued to impact investments during 2014. However, the demand for new power plants was supported by economic growth in the emerging markets, which account for the majority of Power Plants’ order intake. Several orders were also received from the US, as the strengthening of the US dollar against the euro had a positive impact on demand. The shipbuilding markets continue to be focused on Asia. China and South Korea accounted for 41% and 27% respectively of the confirmed vessel contracts in 2014 in terms of compensated gross tonnage. Overcapacity is still one of the main obstacles to a full recovery in the shipping industry. Stronger global GDP growth would be required for this overcapacity to be absorbed. An improved global economic outlook would also boost spending on discretionary maintenance and investments, thereby benefitting the Services business.
Oil prices declined significantly in 2014, mainly due to supply related factors. In the marine markets, lower oil prices will impact the demand for new offshore vessels. In other vessel segments, lower bunkering costs may have a positive impact on the operating expenses for ship owners. Offshore related orders accounted for 28% of Ship Power’s order intake in 2014 and approximately 10% of Group order intake. In the Power Plants business, the low oil prices may impact demand oil and gas production based economies. Offsetting this trend is the strengthening purchasing power of oil importing economies and the potential for increased interest in dual-fuel installations.