MEDIUM RISK for entreprises
Since 2017, the sector has seen more than 30 major insolvencies on average per year.
The “Allianz Euro Fragility Index” captures the systemic tail risk of a Eurozone breakup.
A recession was avoided in 2019, but no rebound is on the cards for 2020.
What to Watch?
Aerospace broadly accounts for 60% of transport equipment output while shipbuilding and rolling stock do 40%. Dominated by Airbus and Boeing, the aircraft sector enjoys large order books that should keep their production lines still busy for a decade.
Shipbuilding continues to cope with excess capacity and low steel prices enabling small players to come through. It resulted in a few high-profile shipbuilding groups’ restructurings aimed at cutting structuring costs, particularly across South (East) Asia.
Rolling stock equipment depends on countries’ infrastructure investments. But these latter depend too on the share of public funding that less-favored regions (or states) are ready to put in.
The surge in global mobility and the demand from clients in transportation account for the growth rate of 9% for transport equipment expected in 2018. More middle-term considerations are the rising share of households for whom air, sea and rail travels are affordable and the evolution of geopolitical tensions from today’s high-threat levels. The trouble is, this growing demand has been putting pressure on the upstream sector’s global supply chain in terms of capability to delivering or not supplying equipment at the right time.
Aircraft manufacturers: Ability to anticipate overcapacities in downstream airline industry
Shipbuilding: Dependency on variations in green taxation and in world trade growth
Rail equipment: Suffering from difficulties in public funding of infrastructure facilities
These assessments are, as always, subject to the disclaimer provided below.
This material is published by Euler Hermes SA, a Company of Allianz, for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by Euler Hermes and Euler Hermes makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of the Euler Hermes Economics Department, as of this date and are subject to change without notice. Euler Hermes SA is authorised and regulated by the Financial Markets Authority of France.
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