Market development and outlook
The global demand for deep-sea transportation was weak in 2019, with a modest decline for automotive exports and a decline in the global high and heavy equipment markets towards the end of the year.
Global auto sales declined by 4.5% in 2019 and totalled 89.5 million units. The US economy continued to develop positively, and auto sales for the US market persisted at a high level with 17.3 million units sold. Sales in Western Europe were affected by different EU regulation milestones and diesel woes but still ended up 0.8% compared to 2018. China recorded a significant decline, down 8.3% driven largely by reduced consumer confidence due to trade tensions and new emission regulations. Auto sales in Brazil continued to rebound in 2019, while Russian sales experienced a slight decline.
Global deep-sea auto exports were down about 1.6% from 2018 to 2019. Auto exports from Europe declined 7.2%, driven by production shifts. North American exports declined 1.9% in line with global Light Vehicle (LV) sales. Japanese exports declined 0.9% from 2018, while Korean vehicle exports continued its negative trend, down 1.3% from 2018, mainly driven by reduced volumes to the Middle East and South Asia. Chinese exports continued to increase, although from a low level due to higher volumes to the Middle East and South Asia.
According to the forecast from IHS Markit, the light vehicle sales outlook for 2020 is forecasted to decline of about 0.7% compared to 2019. US sales are predicted to continue to soften, but to remain historically high in absolute terms. Western Europe is expected to experience a modest sales decline, while Russia and Brazil are likely to extend the positive momentum into 2020. The base case scenario remains that deep-sea volumes will see a moderate growth as volumes out of Europe are expected to rebound as global demand for German premium cars continues. Exports from Japan and Korea are expected to see smaller declines. The light vehicle outlook for deep-sea carried volume for 2020 is flat to slightly positive as we expect to see continued uncertainty due to trade tensions, governmental environmental regulations and geopolitical tensions.
High and heavy market
The global market for large agricultural, construction and mining equipment declined in 2019, following two straight years of strong growth, as trade wars and global economic uncertainty negatively impacted demand for new equipment. Global export volumes dropped 2% y-o-y as growth weakened and remained in negative territory during the second half of the year.
Exports of global construction equipment decreased by 4% y-o-y, led by North America and Asia, which fell 17% and 4%, respectively, and combined accounted for the vast majority of reduced global export volumes. The decline was partly offset by slight growth in European exports. The global contraction is expected to continue in 2020, as continued construction dealer destocking and macro headwinds is projected to reduce OEM revenue in the period, and result in negative overall sales growth for major OEMs. Despite declining sales estimates, global demand of construction equipment is still considered to remain close to historically high levels following record-setting sales volumes in 2018.
Global deliveries of mining machinery declined 18% in 2019 after two subsequent years of growth. North America was the only region that experienced growth as both Asia and Europe declined considerably, 30% and 22% y-o-y, respectively. Mining equipment deliveries to Australia, the second biggest single market, grew y-o-y in every single quarter in 2019 and was up 19% on the year. The Australian expansion is manifested through the NA-OC trade that recorded 35% growth y-o-y during the same period. While the overall global decline appears to mark the end of the growth period that began in mid-2016, it is unclear whether this represents the beginning of a market contraction or simply a pause in a longer-running growth cycle. An analysis of the current global operating mining truck fleet could appear to support the latter view, as there is a growing number of units that are reaching theoretical replacement age. While aftermarket sales have remained strong throughout 2019, several of the mining equipment OEMs have cited global economic conditions and disciplined capex spend among miners as the main reasons why customers are postponing investment decisions. Analysts expect global mining machinery sales to decelerate in 2020 with major OEMs projected to see overall sales decline in the mid-to-high single-digit range.
Despite concerns related to trade, commodity prices and adverse weather conditions that have weighed heavily on farmer sentiment, global trade of agriculture equipment experienced slight growth in 2019 as growth was unsynchronized across key regions.. US large tractor sales recorded 4% growth y-o-y in 2019, despite very challenging conditions for farmers that led to a considerable growth in farm bankruptcies across several US regions compared to the previous year. In the biggest European markets, tractor registrations have remained steady or strengthened. The French market grew 25% in 2019, while UK and German tractor registrations experienced slight growth during the year. However, both UK and Germany reported the highest above-average stocks of new and used machines in the European market, which is expected to negatively impact sales in the first half of 2020. Conversely, the large tractor market in Australia has had a tough year in 2019, declining 8% y-o-y, as drought in the Eastern States entered its second year. Australian expectations for 2020 remain somewhat pessimistic, and well down from the recent peak years. Brazilian tractor sales also struggled in 2019 and fell 19%. The Brazilian contraction has been largely attributed to a lack of subsidized credit for farmers. Analysts expect global farm machinery sales of major OEMs to decline modestly in 2020 before rebounding the following year.
The Covid-19 pandemic is disrupting supply chains and production patterns and will likely also affect demand for vehicles and rolling equipment. The pandemic continues to progress and evolve, and at this juncture it is very hard to predict the full extent and duration of the resulting impact on the economy. The market outlook summarized above hence does not take into account the potential full impact of the evolving COVID-19 pandemic.
The global vehicle carrier fleet totalled 710 vessels (with more than 1 000 CEU capacity) with carrying capacity of 3.95 million CEUs at the end of 2019. In 2019, five newbuildings were delivered and 15 vessels were recycled. During 2019 there were five new orders, all vessels below 4 000 CEU. This resulted in an order book that counted only 14 vessels at year-end, equivalent to about 3% of the active fleet. Most of the order book is scheduled for delivery in 2020 and the remainder from 2021 to 2022.