Cargotec as an investment

(an extract from Cargotec's interim report January–September 2024, 23 October 2024)

The business environment in which Cargotec operates is complex, stemming from high interest rates and inflation, growing geopolitical tensions, and sluggish growth estimates. However, the global economy has remained remarkably resilient and the shipping market is in a strong cycle.

Demand for Hiab's solutions is influenced by general economic growth, construction market development and truck sales, among others. Inflation, high interest rates and political instabilities continue to cause challenges. Decrease in interest rates, easing inflation and overall enhancing economic outlook may boost the customer investment activity, but timing remains uncertain as customers likely still prolong investments expecting more rate cuts in the future.

According to the International Monetary Fund's (IMF) world economic outlook update published in July 2024, the global economy is projected to grow by 3.2 percent in 2024 and by 3.3 percent in 2025. In the IMF’s advanced economies group (a group of countries which includes several key markets for Hiab, such as the United States, the United Kingdom and Germany), the IMF estimates a 1.7 percent growth in 2024 and a 1.8 percent growth in 2025. The report notes that services inflation, linked to both wages and prices, is hindering the disinflation progress and making the normalisation of monetary policy more difficult.¹

The demand for MacGregor’s solutions is driven by merchant ship and offshore newbuilding contracting at shipyards, which has been strong recently. By the end of the third quarter, the new ship orders amounted to 1,723 (Q1–Q3/2023: 1,206), including 119 mobile offshore units. In September 2024, Clarksons Research upgraded their contracting forecast by 17 percent from 1,879 to 2,203 for FY 2024 (FY 2023: 2,221 as per 1 October 2024).² In the merchant segment, the newbuilding demand surged in Q3, especially for container ships driven by a strong market, fleet renewal plans and securing shipbuilding slots. In offshore, contracting remains moderate with wind energy being the demand driver, but oil & gas is also picking up. Environmental regulations and ageing fleets are estimated to increase demand for services and fleet upgrades.

The shipping market is in a continued strong market cycle with high earnings. Geopolitical disruptions, for example, are driving robust shipping capacity demand growth, along with improving seaborne trade volumes. A tight supply-demand balance has increased freight rates and ship owner earnings are above the ten-year average. However, shipyard capacity is a limiting factor for sector growth and newbuild prices are approaching a record-high level.

1 International Monetary Fund: World Economic Outlook Update, July 2024
2 Clarkson Research, September & October 2024