Although the recovery of the shipbuilding markets has been much stronger than anticipated, the market fundamentals in some vessel segments remain unchanged. There is overcapacity, especially in the merchant segment, as order books are still being delivered and ordering activity has been strong in this segment in 2010. Wärtsilä's view on the developments in the merchant segment is cautious for 2011. The strengthening of the offshore segment as well as other more specialised vessel segments important for Wärtsilä, is expected to continue in 2011. Interest in the use of natural gas as fuel in the shipping industry is expected to continue, providing good potential for Wärtsilä within this field.
In 2011, the prevailing conditions will continue to affect competition and price pressure among shipbuilding suppliers. Wärtsilä expects that its Ship Power order intake in 2011 will be moderately better than in 2010.
Recovery in the power generation market is expected to continue in 2011. The growing emerging markets will continue to invest in power generation, and the OECD countries are expected to gradually address the need for changes in their power generation systems. The investments in renewable power may still take some time to recover, but the operational base of renewable energy, mainly wind power, has increased substantially in the past years. This creates a need for flexible power generation to manage the power variations.
At the same time the economics of natural gas generation are good. Natural gas prices have remained stable, and in the USA the prices of natural gas and oil have decoupled as a result of the quick ramp up of shale gas supply and moderate demand. There is also expectation that the ramp down of older coal based generation, due to environmental reasons, will create demand for clean, gas based generation. Wärtsilä Power Plants estimates its order intake to remain at a good level in 2011.
Wärtsilä expects that a sustainable recovery in the marine service market will begin during 2011. Power plant installations will continue to be run at high operating levels.The focus on operational improvement and competiveness will remain high on customers' agendas. Wärtsilä is well positioned to offer service solutions that ensure the reliability and availability of installations whilst reducing the overall maintenance spend. Increasingly stringent environmental regulations pose a challenge for our customers. Wärtsilä's extensive product portfolio offers competitive options for our customers for meeting the new requirements. The size and scope of Wärtsilä Services creates stability in a changing market environment, and provides a platform for future growth.