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Market development

Steady development in the service markets

Service market activity was solid during 2017. In the marine industry, low freight rates affected merchant customers’ appetite for service investments. The offshore service markets remained challenging throughout 2017, although increased oil prices led to some recovery in sentiment towards the end of the year. The cruise segment developed positively, largely due to increased demand for long-term agreements especially in the first part of the year. The demand for power plant related services was steady, supported by the growth in long-term service agreements in Asia.

Power generation markets shifting towards smart and flexible technologies

The demand for Wärtsilä’s energy solutions was strong in 2017. The continued decline in renewable energy prices have made solar and wind power especially competitive in many markets and utilities globally are assessing how to integrate such energy sources into their asset base. The first steps are already being taken in the USA, Australia and the Middle East, where market conditions are the most favourable. This, in turn, is increasing the need for flexible power capacity. Demand was also strong in the emerging markets, where countries are investing in new power generation capacity to support economic growth and alleviate power shortages.

Energy Solutions’ market share

For the twelve months ending in September, global orders for natural gas and liquid fuel power plants of up to 500 MW amounted to 25.2 GW (24.8 GW at the end of June). Wärtsilä's market share was 15% (14). Global orders include all gas turbine and Wärtsilä orders with prime movers over 5 MW in size.

Vessel contracting supported by improved sentiment

During 2017, 1,037 contracts for new vessels were registered (916, including late contracting). Conditions in the merchant and gas carrier markets improved towards the end of the year along with economic growth. However, large order books and scheduled newbuilding deliveries continue to limit utilisation levels and rates in the gas carrier segment. FSRU contracting was healthy, supported by growing LNG demand from the emerging markets and long-term fundamentals. Contracting activity was on a good level also in the cruise, ferry and Ro-Ro segments due to higher earnings, ageing fleets, planned regulatory developments, and attractive newbuilding prices. Despite some recovery in oil and gas prices towards the end of the year, overcapacity continued to limit newbuild investments in the offshore industry.

In terms of compensated gross tonnage, China and South Korea remain the largest shipbuilding nations with 40% and 27% of all confirmed contracts respectively. Japan and Italy accounted for 8% and 5% of the global total respectively.

Marine Solutions’ market shares

Wärtsilä is well positioned in key product and solution areas, such as electrical & automation and gas systems. In the medium-speed main engine market, Wärtsilä’s share was 47% (43% at the end of the previous quarter). The market share in auxiliary engines was 10% (13% at the end of the previous quarter).

 

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