News in Brief — End Market Round-up

Aerospace

This year it was the turn of Farnborough in the UK to host the International Airshow, and Boeing was the clear winner on order numbers. During the show, Boeing announced 192 firm orders and an MoU for another four of its 787-8 jets. This came ahead of the FAA approving the 787 re-certification after upgrades to its production process, followed by Boeing resuming deliveries of the Dreamliner in early August. However the bulk of the orders was for the 737-MAX family including the MAX-10 despite the new plane’s certification continuing to be pushed back.

 

Airbus went to Farnborough with a higher order book than Boeing and having just secured an order for 56 of its workhorse A320-neo planes from easyJet. The European plane maker left the air show with 29 more orders.

 

In July, Airbus delivered 46 aircraft to customers, down from 47 in July last year and 60 in June 2022. Boeing deliveries dropped to 26 in July from 51 in June and were down on 28 in July last year. In both plane makers’ cases, delivery dynamics roughly followed last year’s seasonal pattern. As at the end of July, deliveries in 2022 to date stood at 343 planes for Airbus and 242 for Boeing.

 

Ahead of the Farnborough International Airshow both plane makers published their long-term market forecasts, foreseeing a recovery in the aviation sector post-Covid pandemic.

 

As travel restriction ease, Boeing expects air travel to return to pre-pandemic levels by 2023 or 2024. By 2041, it projects an 80% increase in the market for new planes compared to 2019 pre-pandemic level, with the global fleet requiring 41,170 new jets worth $7.2tr. It expects about half of this number to be more fuel efficient, environmentally sustainable replacements for current models, It expects the growing Asian market to account for more than 40% of this demand, evenly split between China and the rest. Europe and North America that had dominated the aviation sector are expected to make up just over 20% of demand each.

 

Boeing expects single-aisle airplanes to grow from 64% to 70% of the global fleet, while wide-bodies’ share is set to stay at 18%.  But a change in the product mix, is driven by passenger comfort. Medium-size airplanes remain the largest single-aisle segment with a 59% share, but the large models have approached a share of 20%, as smaller airplanes have declined to 13% of the single-aisle fleet.

 

Airbus has a more conservative forecast of the global fleet needing 39,490 new passenger and freighter aircraft over the next 20 years, split roughly 80% single-aisle to 20% wide-body. Compared with its last year’s forecast it has upped its projection for demand for new fuel efficient aircraft by 470 units. By 2041 it expects 80% of the current fleet to be replaced with more fuel-efficient models.

Automotive

In July, China produced just under 2.46m vehicles, up 31.5% y/y, bringing production for the first seven months of the year to 14,571 vehicles, up 0.8%, China Association of Automobile Manufacturers (CAAM). Vehicle sales totalled 2.42m in July, up 29.7% on July last year, bringing the Jan-July total to 14,477m, down 2% y/y.

 

Both production and sales were led by passenger cars, which accounted for almost 87% of China’s vehicle output and sales in the period. Production and sales of passenger cars in Jan-July were up 10.1% and 8.3% respectively y/y, offset by a 36.9% drop in production and 39.3% drop in sales of commercial vehicles.

 

New energy vehicles (NEVs) accounted for around a quarter of China’s vehicle output and sales in July. In the Jan-July period NEV production reached 3.28m and sales 3.19m units, both up 120% y/y.

 

In Europe, electric vehicles continue to buck the ongoing trend of declining car sales, judging by data from the European carmakers’ association ACEA. Car sales have traditionally been a good barometer of an industrial economy, so a 13.6% y-o-y decline in European (EU+EFTA+UK) passenger car sales to 5.6m in the first half of 2022, with double-digit drops in all major markets is a warning sign. However, across the region, sales of battery electric vehicles (BEV) in the first half of 2022 rose by 31.6% y-o-y to 647,479 (overtaking BEV sales in China) and equating to 11.6% of the European passenger car market, against 7.6% a year earlier.

 

Within the EU, in Q2 2022, BEV’s accounted for 9.9% of new passenger car registrations. According to research by Eurometaux, electric vehicle production in Europe will account for 50-60% of the EU’s total demand for metals for clean energy transition as it aims to become carbon neutral by 2050. With BEV sales in Europe forecast to reach 10m cars/y by 2030, supply of battery metals and European EV charging infrastructure need a major step up.

 

Semiconductors

Global semiconductor sales increased 13.3% y-o-y in the second quarter 2022 to $152.5bn, according to the Semiconductor Industry Association (SIA), based on World Semiconductor Trade Statistics (WSTS) organisation. Against Q1 2022 this was a rise of 0.5% in global semiconductor sales revenues. For the month of June, global sales totalled $50.8bn, a decrease of 1.9% from May.

 “Market growth has slowed somewhat in recent months, however, with year-to-year growth in June dipping below 15% for the first time since February 2021,” said John Neuffer, SIA president and CEO, “Sales into the Americas continued to lead all regional markets in June, increasing by 29.0% year-to-year.”

 

Elsewhere, compared with June 2021, sales were up 16.1% in Japan, 12.4% in Europe, 4.7% in China and 11.9% across Asia Pacific and all other regions.  Against May 2022 sales were down across all regions: Japan (-0.7%), the Americas (-0.9%), Europe (-1.1%), China (-2.8%) and Asia Pacific/All Other (-2.3%).

 

According to SIA, which represents most of the US semiconductor industry and almost two-thirds of the industry outside the US, the share of modern semiconductor manufacturing capacity located in the US has decreased from 37% in 1990 to 12% today, while South Korea, Taiwan, Japan and China now account for more than 70% of the total. Incentives offered by the other governments played heavily into this, while US investment in semiconductor R&D had stayed flat as a share of GDP.

 

The US share of global semiconductor manufacturing capacity had looked set to drop to 10% by 2030, but this could yet change.

In August, US president Joe Biden signed into law the CHIPS Act of 2022 (H.R. 4346), which provides $52bn for semiconductor manufacturing incentives and research investments as well as an investment tax credit for semiconductor manufacturing. It also secures $79.344 bn in government spending over 10 years. This could spur private investment.  The SIA said the law “will help usher in a better, stronger American future built on semiconductors.”

 

Today marks a giant leap forward for American innovation and competitiveness and the launching point for re-asserting U.S. leadership in semiconductors,” Neffer said. 

 

“By enacting the CHIPS Act, President Biden and leaders in Congress have fortified domestic semiconductor manufacturing, design, and research, thereby strengthening America’s economy, national security, and supply chains for decades to come.”

 

Oil & Gas

The world has continued to ramp up oil and gas production to reduce its reliance on Russia, with the number of active rigs rising after a dip in May. The Baker Hughes oil and gas rig count in June and July saw rig counts worldwide expand, led by an increase in the Americas and stabilising production in the Middle East.

 

Year-on-year rig numbers were up overall, with 1,775 rigs operating worldwide at the end of July, an almost 29% rise from 1,380 at the end of July last year. In July 2022 the increase in the number of rigs operating in the US, Latin America and Canada offset the number of European rigs holding steady at 87 since June. The US active rig count rose to 756 in July from 739 in June and was up from 484 rigs active in July 2021.