Continued uncertainty in power generation markets
The power generation market situation remained challenging during the first quarter, as macroeconomic volatility and fluctuations in emerging market currencies continued to cause delays in customer decision-making. The geopolitical tension in Ukraine increased uncertainty for investments in the Russian market. Despite these developments, economic growth in the emerging markets continued to support their underlying demand for new power generation capacity. Wärtsilä’s power plant quotation activity improved somewhat during the first quarter and remained focused on natural gas based generation.
Power Plants market share
During 2013, global orders for natural gas and liquid fuel based power generation (including all prime mover units of over five MW) totalled 73.2 GW, a decrease of 3% compared to 2012 (75.4). Wärtsilä's share represents 3.3% of the market (4.2%). The global market size includes exceptional orders from Algeria, which amounted to 11 GW.
Marine market activity on a healthy level
During the first quarter of 2014, 523 contracts for new vessels were registered. This represents an increase in contracting activity of approximately 83% compared to the number of contracts reported in the corresponding period for 2013. Within the merchant markets activity was highest in the bulker segment. The gas carrier markets (LNG and LPG carriers) continued to be active with a total of 43 contracts registered during the first quarter. The offshore markets remained stable and there was continued demand for production units. Customers' earnings levels are still low, but are nevertheless above last year’s average. Newbuilding prices have continued to rise at a moderate rate. Financing has eased somewhat and better terms are available for vessel owners.
China captured 42% and South Korea 35% of the confirmed contracts in terms of compensated gross tonnage (CGT), while Japan secured 13%. Chinese yards are striving to diversify their product mix by securing contracts for more complex vessels and offshore projects, and this endeavour is gradually starting to show results.
Ship Power market shares
Wärtsilä’s share of the medium-speed main engine market was 51% (52% at the end of the previous quarter). The market share in low-speed engines was 9%, while in auxiliary engines the market share was 3% (10% and 4% respectively at the end of the previous quarter).
Stable development in the service markets
Service market activity during the first quarter was stable compared to the corresponding period in the previous year. Demand was steady in both the marine and power markets with a slight increase seen in the navy and mining segments. From a regional perspective, the development in South Europe and Africa remained favourable in both end markets. Activity was particularly good in the US marine service markets and in power plants related services in the Middle East.