Power plant markets remain solid
Power plant market activity was at a good level during 2011 and quotations for gas power plants remained at a high level. During the financial period, the growing emerging markets continued to invest in new power generation capacity. This created a good level of demand that was evenly spread across the globe. Market activity was strongest in the flexible baseload and industrial self-generation segments.
Power generation market overview
As energy consumption grows, the need for new power generation equipment increases, as does the demand for replacement equipment for older capacity. Today, the global installed power generation capacity totals approximately 5,400 GW, out of which more than half is in OECD countries. Going forward, growth is expected to be stronger in the emerging markets, due to increasing industrialisation and rising living standards. The majority of Wärtsilä Power Plants' orders derive from the non-OECD countries. Heavy fuel oil (HFO) has traditionally been the dominant fuel for power generation in the emerging markets, but the demand for gas driven plants is increasing along with the introduction of a natural gas infrastructure. The industrialised countries have focused on the development of wind power and on increasing the share of natural gas power generation, the target being to ramp down old coal-based installations. In the US, the introduction of shale gas has been rapid and has made natural gas prices very competitive.
Power Plants market position
During the period July 2010 - June 2011, the overall market for gas and liquid fuel based power plants grew to approximately 70.1 GW (51.1). This includes all prime mover units of over 5 MW. Wärtsilä’s share represents 4.5% of the market (4.8).
Vessel contracting for specialised tonnage continues to be strong
A total of 1,192 vessels were contracted in 2011, which represents a decrease of 49% compared to the previous year. However, the investment level in newbuilding of ships is comparable to that of 2010, highlighting a shift towards the contracting of specialised vessels. During 2011, dry and wet cargo trades grew, but the fleet of bulk carriers and tankers grew twice as much as the growth in cargo. This evidences an imbalance between supply and demand that resulted in the slowing down of contracting for traditional merchant ships in 2011.
Contracting activity was robust for specialised vessel types throughout the year. By year-end, 50 contracts for LNG carriers were registered and the dual-fuel solution has proven to be the preferred technology for propulsion in this segment. Vessels used for offshore exploration also experienced very robust contracting activity, with notably 36 contracts for drillships being placed in 2011. In the fourth quarter of 2011, several offshore service vessels (OSVs) were contracted.
China accounts for 44% of contracting in 2011 in terms of number of vessels and 36% in terms of Gross Tonnage compensated with workload (CGT). South Korea accounts for 27% and 45% respectively. Thereby, China continues to be the leading shipbuilding country in terms of number of vessels, while South Korea regains its position as the number one shipbuilder in terms of workload for their shipyards. Notably, Brazilian yards booked a number of orders for offshore vessels, positioning the country in the top five shipbuilders for 2011.
Ship Power market shares
Wärtsilä’s share of the medium-speed main engine market was steady at 46% (at the end of the previous quarter 46%). Its market share in low-speed engines increased to 22% (18). In the auxiliary engine market Wärtsilä’s share was 4% (3).
Varying development in service markets
In the beginning of the year, service markets appeared to pick up. However, during the summer, uncertainty in the global economy began to have an impact on this market development, especially in Europe. By contrast, the Middle East, Asia and the Americas continued to be active. Development was strongest in the power plant and offshore service markets. This is in line with the developments in the market conditions and installed base. Development was weaker in the merchant shipping market. At the end of 2011, the installed base of Wärtsilä engines was approximately 180,000 MW.