Power generation market activity slowly improving despite the challenging environment
The demand for new power generation capacity improved slightly during the first half of 2016, especially for larger installations. Wärtsilä’s position developed well in its addressable market, both in terms of orders received and quotation activity. Growth in electricity demand supported power plant investments in the emerging markets, while demand continued to be more limited in the industrialised world. Despite the somewhat improved sentiment, the market for liquid and gas fuelled power generation remains challenging as a result of macroeconomic uncertainty and tight competition for projects.
Energy Solutions market share
In the first quarter of 2016, global orders for natural gas and liquid fuel power plants of up to 500 MW totalled 4.3 GW (4.7), a decrease of 9% from the previous year. Wärtsilä’s market share increased to 20% (15). Global orders include all gas turbine and Wärtsilä orders with prime movers over 5 MW in size.
Limited demand for new vessels
Contracting activity clearly weakened during the first half of 2016, with only 228 contracts for new vessels registered, compared to 806 in the corresponding period of the previous year. The decline in vessel orders primarily affected the traditional merchant, gas carrier and offshore segments, which continue to be burdened by low freight rates, depressed oil and gas prices, and overcapacity. The demand for cruise ships, ferries and RoRo vessels remained at a good level, supported by fleet renewals, low newbuilding prices, and healthy earnings in the RoRo segment.
In terms of compensated gross tonnage, contracting activity was more evenly distributed outside the traditional top three shipbuilding countries. This was largely driven by the increase of cruise vessels within the contracting mix. Of the confirmed contracts, China secured 38%, Italy 14%, and South Korea 13%, while Germany and Japan secured 11% and 9% respectively.
Marine Solutions market shares
Wärtsilä’s share of the medium-speed main engine market was 58% (60% at the end of the previous quarter). The market share in auxiliary engines was 13% (13% at the end of the previous quarter).
Stable development in the service markets
Service market activity was stable during the first half of the year in both end markets. In the marine market, the low demand for offshore services is affecting selected regions. Service activity in the other vessel segments was steady. The demand for power plant related services developed well in Africa, while the utilisation of power plants under service agreements continued to be limited in Brazil.