Trucks OEMs: The supply-chain situation has been improving so far this year, accelerating production rates and boosting delivery volumes. A healthy backlog and pent-up demand from years of poor production due to a lack of supply should support manufacturing rates in the remainder of 2023. Nevertheless, additional new orders for heavy trucks risk being threatened by the weak economic outlook that is destabilizing global trade.
Aerospace: The financial results of companies have been topping market expectations, thanks to a pick-up in commercial aircraft deliveries as their production accelerated. Plane deliveries should rise further by the end of 2023 and beginning of 2024, driving better profits, margins and cash flow. Yet, engine makers and other suppliers could see lower margins as rising OEM deliveries dilute gains from strong aftermarket demand. Suppliers have been also struggling with sourcing and employee training.
New orders: After having grown drastically in 2021 and 2022, new orders are currently threatened by the deterioration of the global economic outlook. However, the urgent decarbonization of the transportation sector could keep orders rising, especially in the shipping industry. Because of the still ongoing energy crisis, demand for LNG tankers will continue to be high so shipbuilders with expertise in this field will see some market expansion.
Backlog: The large increasing capex of transportation companies during 2021 and 2022 led to this sector accumulating a level of backlog not seen before, which has ensured continued production and revenue collection in 2023. Many shipyards and aircraft builders have tried to expand their manufacturing centers in order to cope with increased demand as some production hubs are at full capacity. This has been affecting the aviation industry, where deliveries are below the desired level even though they have increased significantly compared to 2022 volumes.
Purchasing contracts: The manufacture of transport equipment is a costly and time-consuming business as it can take about two to four years to design and build a vessel, airplane or train. Because of the long duration of these projects, there are many risks along the process and a lot can go wrong. As a result, contracts often go hand-in-hand with insurance bonds (from bid bonds for the tender offer to performance bonds and advance payment bonds for assuring the completion, delivery of and payment for the asset). In many cases, the transportation company places an order for several units, which considerably increases the size of the contract. This is why it is common to see purchasing contracts guaranteed by an export credit agency (ECA).
