Challenging conditions in power generation markets
The power generation markets were challenging throughout 2015, as global macro-economic uncertainty limited investments in new power plant capacity. Market volumes remained at a relatively low level, despite the slight increase in global orders for natural gas and liquid fuel power plants. Growth in the emerging markets and the availability of financing continued to support demand. In the industrialised world, electricity consumption was on a low level and economic growth is needed to boost power plant investments. Excess manufacturing capacity as a result of low demand in the marine industry has caused engine manufacturers to focus more on the power plant sector, resulting in increased competition in several markets. Wärtsilä’s quotation activity was at a high level in 2015, and remained concentrated on multi-fuel and natural gas based power plants.
Energy Solutions market share
During the first nine months of 2015, global orders for natural gas and liquid fuel power plants up to 500 MW totalled 17.0 GW (16.5), an increase of 3% from the corresponding period of 2014. Wärtsilä’s market share was 9.9% (10.5). Global orders include all gas turbine and Wärtsilä orders of prime movers over 5 MW.
Contracting volumes remain low
During the period January-December 2015, 1,371 contracts for new vessels were registered (1,711), of which 230 were in the fourth quarter (191). Newbuilding prices have been under pressure throughout the year due to the low demand for new vessels. Contracting activity in the conventional merchant markets was slow. Weak freight rates and overcapacity adversely affected the ordering of container vessels and bulkers, while low oil prices and improved earnings supported tanker contracting. Gas carrier orders remained below the strong volumes seen in 2014, with a total of 92 vessel contracts registered in 2015 (173). Demand in the offshore market declined from the previous year, as depressed oil prices continued to limit investments in exploration and development. There was a good level of contracting for cruise vessels and ferries.
The top three shipbuilding countries continued to control contracting activity in terms of compensated gross tonnage. China and South Korea each secured 30% of the confirmed contracts. Japan’s share of the confirmed contracts improved to 27%, thanks to increased domestic ordering activity. Other countries improved their share from the previous year, with 292 orders placed outside the top three shipbuilding countries.
Marine Solutions market shares
Wärtsilä’s share of the medium-speed main engine market was 59% (63% at the end of the previous quarter). The market share in auxiliary engines increased to 12% (9% at the end of the previous quarter).
Strong development in the service markets
Service market activity developed favourably in 2015, with volume growth accelerating during the first half and demand continuing to be high throughout the rest of the year. Activity in the marine industry improved globally. Lower operating costs due to lower fuel prices and the release of pent up demand supported investments in maintenance activities, especially in the merchant segment, while increased demand for propulsion upgrades and thruster retrofits created growth in service projects. Power plant service activity developed well, thanks to increased utilisation of installations under contract and the demand for spare parts in specific regions resulting from the aging installed base. Customer focus on the optimisation of maintenance and performance has increased interest in long-term service agreements in both end markets.
At the end of 2015, 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%.