Continued uncertainty in power generation markets
The market situation remained challenging throughout 2014, with macroeconomic uncertainty and slower global growth projections impacting investments in new power generation capacity. However, the economic growth in the emerging markets supported the demand for new power plants. The strengthening of the US dollar against the euro also contributed to ordering activity. Wärtsilä’s power plant quotation activity was strong in 2014. Quotations remained focused on natural gas power plants.
Power Plants market share
During the first nine months of 2014, global orders for natural gas and liquid fuel power plants (including all prime mover units of over five MW) totalled 37.7 GW. The market was stable compared to the corresponding period last year, when global orders totalled 38.0 GW. Wärtsilä's market share was 5.0% (4.7%). In Wärtsilä’s main addressable market, i.e. the market for installations up to 500 MW, orders totalled 16.5 GW (25.0) and Wärtsilä’s market share was 10.5% (7.1%).
Contracting activity favours specialised tonnage
During the fourth quarter of 2014, 216 (633) contracts for new vessels were registered, bringing the total number of vessel contracts for the year to 1,769 (2,201). Newbuilding prices are under pressure due to current market volumes. In the traditional merchant markets, contracting activity was slow and freight rates remained weak. The ordering of gas carriers (LNG and LPG carriers) was, however, robust throughout the year. A total of 177 gas carrier contracts were registered, compared to 116 in the previous year. LPG carrier ordering was strong in the beginning of the year but slowed down during the second half, while LNG carrier ordering picked up. The cruise vessel markets developed well with contracting volumes doubling compared to 2013. Demand for offshore vessels was clearly lower than in the previous year, mainly due to the decline in oil prices, poor day rates, and spending cuts from international oil companies.
China and South Korea continued to be the largest shipbuilding countries, capturing respectively 41% and 27% of the contracts confirmed in 2014 in terms of compensated gross tonnage, whereas Japan secured 20%. During the period January-December, 266 orders were placed from countries other than these top three.
Ship Power market shares
Wärtsilä’s share of the medium-speed main engine market was 52% (51% at the end of the previous quarter). The market share in auxiliary engines was 3% (2% at the end of the previous quarter).
Growth in the service markets
The demand for services grew in the fourth quarter, with particularly good activity in the European offshore markets and the Middle Eastern power plant service markets. For the full year 2014, overall service market activity developed well. Marine customers’ service demand picked up in the second half, and the demand for power plant related services was healthy throughout the year. From a regional perspective, service activity increased in all areas. The highest growth was seen in southern Europe and Africa, largely due to customer interest in service projects. At the end of 2014, Wärtsilä’s installed base totalled 181,000 MW. Four-stroke engines accounted for approximately 60% of the installed base and two-stroke engines for approximately 40%.