The Transportation Market for Cable Assemblies – Back On Track?

The transportation market for cable assemblies includes a diverse set of industries. This market includes commercial aviation, with companies such as Boeing, Airbus, Embraer, and Bombardier; over-the-road transportation, such as trucks, buses, and RVs; ships and boats; rail; and civil space commerce. Each of these sub-sectors face unique market pressures. The market is also affected differently in various regions of the world.

The worldwide market for cables assemblies in transportation was $4,864 million in 2008. With the recession of 2008/2009, the market declined 25.3 percent, to $3,632 million in 2009. The largest declines regionally were in Europe, at 27.6 percent, and North America, at 26.3 percent. Of the 10 market segments that we divide the cable assembly industry into, only two other segments had larger declines—automotive and industrial.

There are several factors impacting the 2010 market. Let's look at the market sub-sectors and regions to ferret out the potential results.

Commercial aviation will have a lackluster year in most regions. The consolidation of carriers in the airline industry, the reduction of scheduled flights to increase their load factor, the reduction in passenger revenues, and the reduction of revenues from freight—down 21.5 percent in the U.S. in 2009—have led to the mothballing of planes and cancellation of orders for new planes. Boeing saw orders decline 61 percent in 2009. Both Boeing and Airbus have been hit hard on their workhorse planes, the Boeing 737 and the Airbus 320. The International Air Transport Association is only expecting a 5.2 percent increase in passenger and cargo traffic in 2010, so there will not be much drive from the market to stimulate demand for new planes beyond current levels. The bright spot for commercial aviation is the Far East. With the economies running relatively strong, particularly China, the demand for long-haul planes, like the Boeing 777 and 747, and the Airbus 330 and 340, may be ramping up. There is also continuing demand for more fuel-efficient planes. These factors will help sustain this industry through 2010.

Trucks, buses, and RVs will also see a difficult year in North America and Europe. The downturn in the European and North American economies have meant less shipping, hence less delivery trucks and semi-transports (planes and railcars). In the United States, state and local governments are struggling to eliminate budget deficits. This means fewer purchases of school buses and transit buses. And the RV market in the U.S. may never see a full recovery due to the elimination of easy credit and the ability to borrow against inflated home prices, as happened in the middle part of this decade. There is also a glut of RV inventory and used vehicles.

Ships and boats have three sides to consider. On the commercial shipping side, the Far East continues to produce more of the world’s products—and must deliver those products. At the same time, shipping volumes are off due to the slow economic recovery in Europe and North America. The demand for freight ships, thus, is somewhat tempered. For pleasure craft, particularly the middle to lower end, the markets will remain down in 2010 due to slow economies and tight credit markets. South Korea is the largest builder of ships, manufacturing approximately 50 percent of the worldwide production. They are followed by China, with about one third of the world’s production. The bright spot in shipping is for military ships. North America, China, and Europe continue to build ships to project their power in their respective regions, and worldwide.

Rail is affected differently in different regions. Although European economies are in a slow (or no-) recovery mode, the region is very dependent on their highly developed rail systems for the transportation of people and goods. As a result, Europe will continue to spend funds to maintain and replace equipment. Japan is in a similar situation. China, with the push to grow their industries in their western provinces—away from the congestion and higher labor rates of the southeastern part of the country—will probably expand their rail service capacity to Western China. In the United States, the rail industry has been hurt by the economic downturn, as less freight is moving in general. The bright spot in the U.S. was high-speed rail. The American Recovery and Reinvestment Act provides for funding of these projects. To date, however, no money has been spent to build the infrastructure or the equipment.

Civil space commerce is still in its infancy. The industry is growing, but it remains to be seen how quickly this sector develops.

Bishop & Associates expects the worldwide market for transportation cable assemblies to grow by approximately 20 percent in 2010, to $4,357 million. The five-year compound annual growth rate is projected to be 6.5 percent. Beyond 2010, the growth will largely depend on how quickly the world economies recover. This industry is highly dependent on economic growth and prosperity. The most probable areas for growth are in China and Europe.