The global economy started to show signs of slowing in 2018 with growth unchanged on the year before and the emergence of a cyclical deterioration in the two major economies of Europe and China. Despite the European Central Bank's continued pursuit of expansionary monetary policies, Eurozone economic growth was worse than in 2017 due to a general deterioration in business expectations (fall in industrial output especially in the final months of the year) and a contraction in foreign demand.

Specific factors also weighed on this slowdown, such as the great uncertainty being generated by the prospect of a negative outcome to the Brexit negotiations or the entry into force of the worldwide harmonised light vehicle test procedure for automotive sector emissions, which has caused the industry's production in the main producer countries (Germany, Italy) to come to a standstill. 

US economic growth exceeded the previous year's even in 2018, benefiting from expansionary fiscal policies, the impact of lower corporate taxation, and robust consumer spending. China recorded a high but nonetheless lower growth rate than in 2017, despite the government's fiscal stimulus policies.  

Global GDP grew by +3.7%* year-on-year (basically unchanged on +3.8%* in 2017), reflecting a slight slowdown by both more developed economies (from +2.4%* in 2017 to 2.3%* in 2018) and emerging ones (+4.7%* to +4.6%*).   The United States continued to expand in 2018, with growth of 2.9%* beating that of 2.2%* in 2017, thanks to increased domestic spending and higher exports.  The uncertainty surrounding Brexit, following the British Parliament's failure to ratify the agreement reached in November by the government, had a negative impact on both the Eurozone and the United Kingdom.

The Eurozone reported a sharp slowdown in growth from 2017: from +2.4%* to +1.8%* this year; this reflected a negative trend for basically all the main European economies, which displayed a drop in industrial production in the last period of the year: Germany's GDP growth went from +2.5%* to +1.5%*, Italy's from +1.6%* to +1.0%*, France's from +2.3%* to +1.5%* and Spain's from +3%* to +2.5%*. Even Great Britain followed the same trend as the other major European economies, with a sharp slowing in growth from 1.8%* in 2017 to +1.4%* in 2018. 

As for the emerging economies, China lost its primacy in growth to India. Chinese economic growth suffered a slowdown, even if its rate was once again above the average of other emerging countries, going from 6.9%* in 2017 to 6.6%* in 2018. India reported growth of +7.3%* in 2018, improving from 2017 (+6.7%*), confirming itself as one of the main drivers of growth in the region, along with China. The Brazilian economy posted positive growth for the second year in a row (+1.3%*), in the wake of the 2016 recession.

Cable industry trends

Global demand for power cables in 2018 displayed higher volume growth than the previous year, mainly driven by performance on the European and North American markets. Demand for telecom (copper and optical fibre) cables was stable in fast-developing markets (China and APAC) which alone accounted for more than 50% of the market. Optical fibre cable consumption continued to expand in North America, and in Europe thanks to plans under the Digital Agenda for Europe 2025. Geographically, Brazil shrugged off its previous slowdown, reflecting the challenging economic conditions faced in recent years, to confirm stable demand for both energy and telecom cables. 

Emerging Asian economies (China, India, Southeast Asia) were confirmed as the main engine of 2018 growth in global demand for power cables, while the Middle East region, where the oil crisis and geopolitical uncertainty had adversely affected regional economic performance in the past, recorded an improvement. In the United States and Europe, demand for power cables continued the upward trajectory initiated in previous years, supported by a resurgence in industrial output and consumer confidence.

As for the optical cable market, China accounted for more than 50% of global volume growth, despite stable demand versus the previous year, followed by North America and Europe, which both displayed higher growth than in 2017. 

The impact on Prysmian

The various segments of Prysmian Group's market had a mixed performance in 2018, featuring expansion by optical fibre cables, general stability in demand for cables for industrial applications and infrastructure and softer demand for cables by utilities in certain regions (North Europe), albeit recovering in the final part of the year.   

After a weak start to the year, the submarine cables market reported a recovery in the second half, with a number of projects awarded in the final months of the year. The size of the submarine cables market was about Euro 2.8 billion, slightly above its past average.  By contrast, demand continued to grow in Southeast Asia, where the Group has won a number of major interconnection projects. Tendering activities have started for the major Suedlink and Suedostlink underground HVDC cable projects in Germany.

Partly thanks to political stabilisation, Brazil has seen the major telecom carriers resume investments in both copper and optical fibre cables. North America has continued to see a big increase in data consumption by all sectors of society. As a result, the major market players - AT&T and Verizon to name just a few - are investing in fibre network infrastructure. For instance, Verizon has announced that it is upgrading its network architecture around a next-generation fibre platform with the aim of increasing 4G coverage and laying the foundations for the subsequent development of 5G and IoT (Internet of Things) technology. There has also been growing demand for interconnections between data centres.

The industrial applications business saw a mixed trend for the different market niches. While cables for the automotive and railway infrastructure industries were stable year-on-year, the nuclear and infrastructure businesses recorded a minor decline.   In the Oil & Gas business, demand for onshore projects remained at the same level as the year before. The Downhole Technology business saw signs of improving demand primarily linked to growth in production of Shale Oil & Shale Gas in North America.

The Trade & Installers business enjoyed a positive trend in demand during 2018 in most of the European countries served as well as in North America. As for Power Distribution, the major European countries have seen a generally stagnant trend in energy consumption in recent years, in turn adversely affecting demand by the main utilities. The latter, operating in a recessionary economic environment, have either maintained extremely cautious positions given the difficulty of forecasting future growth, or else they have concentrated on business restructuring to improve efficiency and reduce supply-side costs.