The global demand for deep-sea transportation developed favourably in 2018, with modest growth for automotive exports and continued recovery in the global high & heavy equipment markets.
Global auto sales declined by 0.5% in 2018 and totalled 93.8 million units. The US economy continued to develop positively, and auto sales for the US market were slightly up in 2018 at a healthy level of 17.3 million units sold. Sales in Western Europe developed positively in the first half of the year, but started to drop from September due to the new emission scheme WLTP and ended the year down 0.4% compared to 2017. China recorded the first annual loss for more than 20 years down 3.3% largely driven by reduced consumer confidence due to the trade tension with the US. Auto sales in Brazil and Russia continued to rebound in 2018 with double-digit growth figures, but from a low base.
Global deep-sea auto exports were up about 2.5% from 2017 to 2018. Auto exports from Europe developed steadily up 0.8%, as hunger for premium brands remained solid in many parts of the world. North American exports continued to increase (up 2%) driven by new volumes out of Mexico. Japanese exports increased with 4.5% from 2017, while Korean vehicle exports continued the negative trend, down 2.5% from 2017, mainly driven by reduced volumes to the Middle East and South America. Chinese exports increased in 2018 with 36% as both western and domestic brands increased their focus on exports partly explained by a slow domestic market in China. The domestic Chinese OEM’s still produced volumes for export which were mainly delivered to emerging markets.
The sales outlook for 2019 is stable with a forecasted growth of about 1% compared to 2018. US sales growth is predicted to continue to be soft, but to remain historically high in absolute terms. Western Europe is foreseen to experience a modest sales decline while Russia and Brazil are expected to extend the positive momentum into 2019. The base case scenario remains that deep-sea volumes will continue to grow as trends from 2018 are likely to continue with new volumes out of North America, solid exports from Europe, and new volumes out of China. Exports from Japan is expected to be in well shape, while Korean export are expected to decline slightly. However, the outlook for 2019 is increasingly uncertain due to weaker auto sales in certain markets, potential risk of trade barriers and a slightly softer macro picture.
High & heavy market
The global market for large agricultural, construction and mining equipment continued to expand in 2018, following the strong recovery a year prior that ended four consecutive years of decline. Global trade volumes increased about 10% last year, but growth rates moderated from the highs when entering the year.
Global construction equipment volumes remained key to the continued market expansion and increased 15% y-o-y in the first ten months of 2018. The strong turnaround a year prior was characterised by almost every single market globally advancing, and all regions except Latin America continued to experience growth in 2018. The global cycle is assumed to continue in the coming year, albeit at a far more measured pace than in previous years as the global economic expansion is becoming increasingly unsynchronised.
The mining equipment replacement cycle continued in 2018, as producers are replacing machinery commissioned during the early years of the super cycle. Global deliveries of surface mining machinery increased 35% with all regions except for Asia experiencing growth compared to the previous year. Commodity prices moderated from mid-year, driven in part by trade related worries, but are still 30-40% above trough levels for key metals. Prices are assumed to remain supportive of continued machinery investment, and the capex outlook among mining majors remains favourable for the year ahead.
While weak agricultural commodity prices continued to weigh heavily on farm income in 2018, the global market for agricultural equipment showed some signs of recovery last year. North American large tractor sales increased 6% in 2018, as replacement demand put an end to four straight years of decline. The Brazilian tractor market strengthened 5% from the previous year, as new farmer financing rates became available. Tractor registration in the biggest European markets were mixed, with flat development in UK, the French market continued to struggle and Germany edged up. Sales in Australia were unchanged compared to the previous year, as drought related worries dampened sales in the second half of the year.
The global vehicle carrier fleet totalled 741 vessels with carrying capacity of 4.08 million CEUs at the end of 2018, up about 2% from year-end 2017. In 2018, 14 newbuildings were delivered, and 10 vessels were recycled. 2018 was an uneventful year in terms of ordering of newbuildings, with zero vessels ordered. This resulted in a sharp decline in the order book, counting only 16 vessels, equivalent to about 3% of the active fleet and the net fleet growth is forecasted to be marginal for several years going forward. The majority of the order book is scheduled for delivery in 2019 and the remainder from 2020 to 2021.