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The global economy presented a positive scenario in 2017, with a higher growth rate than 2016, particularly reflecting stronger performance in the Eurozone and the United States and recovery by emerging countries like Brazil and Russia, after two years in recession.

Eurozone economic growth improved on 2016, even if below the world average, thanks to the European Central Bank's continued pursuit of expansionary monetary policies and the gradual growth in business and consumer confidence across the region. The strengthening recovery over the course of the year was also favoured by the outcome of the French elections, which averted the ascent of an anti-European government.

Higher growth in the US reflected a stabilisation in the political environment and a gradual recovery in activity related to the oil industry. China's growth improved on 2016, even beating government forecasts, thanks to continuation in 2017 of stimulus measures to support the housing market and infrastructure investment.

EN - Investors - Reference scenario - chart

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* Source: IMF, World Economic Outlook Update – January 2018

 

Global GDP grew by +3.7%* year-on-year (compared with +3.1%* in 2016), reflecting marked improvement by advanced economies from +1.7%* in 2016 to 2.3%* in 2017 and more modest progress by emerging economies from +4.4%* to +4.7%*.
After slowing in 2016, the US economy's growth once again topped the 2% mark in 2017 (+2.3%*), benefiting from greater political stability and the gradual recovery in oil prices.

After the shock provoked by the pro-Brexit vote in 2016, the Eurozone grew at a rate of +2.4%*, its highest in the last 10 years and well up from +1.7% in 2016, while in Britain the uncertainty surrounding the post-Brexit negotiations triggered a mild dip in growth from +1.9%* in 2016 to +1.7% in 2017. Within the Eurozone, all the major economies reported a marked improvement, with Germany going from +1.9%* to +2.5%*, France from +1.2%* to +1.8% and Italy, which made the biggest progress, from +0.9%* in 2016 to +1.6%* in 2017. Lastly, in Spain growth eased from +3.3%* in 2016 to +3.1%* in 2017, mainly due to growing political uncertainty in the second half of the year.

Chinese economic growth once again exceeded the average for other emerging countries, going from +6.7%* in 2016 to 6.8%* in 2017, even beating the government target of +6.5%, thanks to the government's introduction in 2016 of a series of important measures to support infrastructure investment, carried over into 2017. India reported growth of +6.7%* in 2017, slightly down from +7.1%* the year before, confirming itself as one of the main drivers of growth in the region, along with China.

Renewed political stability and a gradual recovery in the main commodity prices helped the Brazilian economy resume its growth after 2 years in recession, recording a +1.1%* after contracting -3.5%* in 2016, while stabilisation of the geopolitical scenario allowed Russian growth to improve from -0.2%* in 2016 to 1.8%* in 2017.

EN - Investors - Reference scenario - Cable industry trends

Cable industry trends

Global demand for power cables in 2017 saw improved volume growth on the previous year, mainly driven by a recovery in Brazil after two years of downturn, and by China where growth continued to beat the world average. Demand for telecom cables continued to climb in 2017, boosted by double-digit growth in optical cable volumes, as partially offset by shrinking demand for copper cables, gradually being replaced. Geographically, Brazil shrugged off its previous slowdown, triggered by the challenging economic conditions faced in recent years, to post a sharp uptick in demand for both energy and telecom cables.

Emerging Asian economies (China, India, Southeast Asia) were confirmed as the main engine of 2017 growth in global demand for power cables, while the main area of weakness was the Middle East region, where the oil crisis and geopolitical uncertainty adversely affected regional economic performance. In the United States and Europe, demand for power cables continued the upward trajectory initiated in 2016, 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, followed by North America and Europe, which both displayed higher growth than in 2016, while the Australian market witnessed astabilisation. The various segments of the market had a mixed performance in 2017, featuring strong expansion by optical fibre cables, moderate growth in demand by cables for industrial applications and infrastructure, general stability in the European high voltage underground market and softer demand for cables by utilities, especially in Central Europe.

The optical fibre cables market benefited from growing demand for data transmission capacity, making it essential to upgrade existing network infrastructure, particularly in Italy and France, where the existing network is still predominantly in copper cable, while North America started to see the first initiatives to develop the 5G network. The market for optical fibre cables also benefited from growing investments by the principal Chinese carriers, who represented the biggest source of growth in global optical cable demand.

EN - Investors - Reference scenario - The impact on Prysmian

The impact on Prysmian

The submarine cables market grew compared with 2016, benefiting from major contracts for interconnectors and offshore wind farm connections, with the mix of projects more or less evenly split between these two categories. The Prysmian Group was confirmed as undisputed market leader after winning major turnkey interconnector contracts in Europe (the IFA2 interconnector between France and the UK worth around Euro 350 million) and Asia (the CNP-3 interconnector between the islands of Cebu and Negros in the Philippines worth around Euro 150 million) as well as the project to develop offshore wind farms in France commissioned by RTE, worth a total of more than Euro 300 million. In a largely stable market for high voltage underground cables, the Group retained its market share in Europe and North America, but posted a steep drop in turnover in China due to the industrial reorganisation at the end of 2016.

The industrial applications business saw a mixed trend for the different market niches. While cables for the automotive and railway infrastructure industries reported double-digit growth, applications for port cranes and renewable energy were affected by softer demand in North America and Europe. Applications for the Oil & Gas segment were negatively impacted by the contraction in demand for umbilical cables in Brazil, while "core" cables benefited from a resumption in activity to develop new onshore projects in the United States and Middle East. The T&I building wires business posted a moderate recovery in the second half of the year, mainly due to volume growth in Central and Southern Europe and the Nordics, partly thanks to introduction of the new Construction Products Regulation, while the tough economic climate in the Middle East (Oman) caused business in this region to decline. Medium and low voltage cables for Utilities (the Power Distribution business) recorded a slight decrease on 2016, especially in Germany after a recent update to tariffs affecting local utilities.

The optical fibre cables market maintained a solid growth trend during 2017, driven by increased demandin North America and Europe, which benefited from growing investments by both public and private operators to increase the level of broadband coverage, and from commencement of the first projects to develop 5G networks in the United States. In this context, Prysmian Group has been awarded a contract worth USD 300 million by the US carrier Verizon to develop a 5G network. The copper telecom cables business slowed in 2017 mainly due to lower demand in the Australian market, which had benefited from a major contract in 2016. Lastly, the multimedia (MMS) business reported general stability, on a consistent comparative basis, buoyed by growing demand for cables for indoor applications (like datacentres) in Europe and Asia.

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