Improved activity in the power generation markets
Sentiment in the power generation markets improved during 2016. The emerging markets were active and their growing demand for electricity drove interest in Wärtsilä’s solutions. New energy policies and increasing power generation from renewable sources provided further support for power plant investments, both in the emerging markets and the industrialised world. Despite the positive developments in many regions, competition remained tight globally.
Energy Solutions market share
In the first nine months of 2016, global orders for natural gas and liquid fuel power plants of up to 500 MW totalled 17.4 GW (17.0), an increase of 2% from the previous year. Wärtsilä’s market share increased to 15% (10). Global orders include all gas turbine and Wärtsilä orders with prime movers over 5 MW in size.
Weak marine market environment
Newbuild vessel orders fell to an exceptionally low level in 2016, with merely 537 vessels contracted during the year compared to 1.836 in 2015. The challenges related mainly to overcapacity, low oil & gas prices, and weak freight rates in the traditional merchant, offshore and gas carrier segments.
While the general marine market sentiment was weak throughout the year, activity remained resilient in selected niche segments. Demand was particularly strong in the cruise segment due to fleet expansion programmes. An ageing fleet, planned regulatory developments, and attractive newbuilding prices supported contracting in the ferry segment. In the ro-ro segment, healthy earnings also supported the demand for new vessels.
The shift in vessel contracting mix has benefitted European shipyards. In terms of compensated gross tonnage, Italy and Germany’s share of confirmed contracts was above average at 11% and 10% respectively. China remained the largest shipbuilding nation with 36% of the confirmed contracts, while South Korea’s share declined to 16% and Japan’s share was 11%. The low vessel contracting volumes has led to some consolidation of yards in the major shipbuilding countries during the year.
Marine Solutions market shares
Wärtsilä’s share of the medium-speed main engine market was 51% (50% at the end of the previous quarter). The market share in auxiliary engines was 18% (16% at the end of the previous quarter). Wärtsilä also has a strong position in other key products and solutions, such as electrical & automation systems and gas systems.
Solid activity in the service markets
Service market activity was solid during 2016. In the marine market, low oil prices affected the demand for offshore services throughout the year, while low freight rates caused the demand for services in the merchant segment to slow down in the second half. The cruise segment developed positively, especially during the latter part of the year. In power plant related services, the interest in long-term agreements continued to be impacted by global economic uncertainty. However, the demand for maintenance services was healthy throughout the year.
Wärtsilä’s installed equipment base consists of propellers, engines and other products. At the end of 2016, Wärtsilä’s installed engine base totalled approximately 180,000 MWs, of which four-stroke engines accounted for approximately 65% and two-stroke engines for approximately 35%.