US holds on to position as top exporter; Middle East outspends
all of Western Europe combined, but shrinking backlog points to
long-term global contraction
Weakening defence export order backlog points to a contraction
in the market by 2018, according to the annual Global Defence Trade
Report released today by IHS Markit (Nasdaq: INFO), a world leader
in critical information, analytics and solutions. The report
examines trends in the global defence market across 65 countries
and is based upon 40,000 programs from the Jane’s Aerospace,
Defence & Security’s Markets Forecast database.
Defence trade deliverables grew substantially in 2016. Markets
expanded by $4.3 billion to hit $62.5 billion, as imports rose
despite global defence spending falling between 2010 and 2013.
However the total export backlog - orders placed but yet to be
delivered - has fallen by around five percent and is on track to
decline rather than stabilize over the coming three years.
“For the first time we are forecasting a decline in our
expectations for the global defence export market. This is
happening for a number of reasons including falling energy prices,
increasing domestic production and the world simply pausing for
breath after such a long run of increases,” said Ben Moores, senior
analyst, Jane’s by IHS Markit.
“Traditionally deliveries have slipped to the right so it could
well be that the fall in the total market comes in 2018. This would
be the first fall since our records began in 2009,” Moores
said.
Key findings from the Global Defence Trade Report:
- Middle East countries imported $21
billion in defence equipment in 2016 - one third of the entire
global market - and will import at least $22 billion annually for
the next four years.
- Saudi Arabia increased its lead as top
global importer, now importing nearly three times as much as its
closest rival, India. This dominance is set to continue for at
least five years with further large aviation, vehicle and naval
orders.
- The US remained the highest exporter in
2016, supplying $23.3 billion worth of military goods.
- Military imports throughout Western
Europe rose from $7.9 billion in 2013 to $8.9 billion in 2016. This
climb takes western European imports back to 2010 levels.
- Large order backlogs in Asia, including
Japan ($14 billion), South Korea ($12 billion) and Taiwan ($13
billion).
- Significant rise in defence export
opportunities to Vietnam, Indonesia, Taiwan, Iraq and Egypt.
Middle East’s spending spree continues
The largest Middle Eastern defence importers – Saudi Arabia,
United Arab Emirates, Algeria and Iraq – remained among the top
importers in the world for 2016, importing a total of $15.2 billion
in defence systems. This figure is up from $9.9 billion in 2014,
and represents more than all of Western Europe’s imports
combined.
“Saudi Arabia’s 2016 imports grew from $4.9 billion to $8.3
billion – an increase that is three times more than the entire
Sub-Saharan African market,” Moores said. “As the Middle East has
assets against which it can borrow until oil prices recover, we
expect to see sustained growth in defence spending for the next few
years.”
Based on the existing order backlog, Jane’s forecasts that this
region will continue to import an annual average of $22 billion in
equipment over the next four years, before dropping off sharply
after 2020.
US dominates export market
The US remained the highest exporter in 2016, increasing its
relative market share at the expense of Russia to supply $23.3
billion worth of goods and equipment in 2016, compared with $21.5
billion in 2014. Its primary export strength is in its aerospace
products; set to continue with strong orders in place for its F-35
program.
For the third year in a row, Saudi Arabia was the primary
recipient of American military equipment in 2016. Although the US’s
10-year backlog remains strong, political uncertainty in countries
such as Saudi, UAE and Qatar means there is a possibility that some
of these projects may be cancelled.
Western Europe falls short of 2009 outlay
Military imports throughout Western Europe rose from $7.9
billion in 2013 to $8.9 billion in 2016. This slight climb takes
Western European imports back to 2010 levels but still some way off
2009’s $12 billion peak.
“While we don’t foresee a return to pre-2008 import commitments,
Western Europe finally saw a return to growth in defence spending
in 2015 which will translate into sustained deliveries in the next
couple of years,” Moores said.
Western European exports fell from $16.3 billion in 2009 to
$14.9 billion in 2013, but increased notably to hit $17.8 billion
in 2016. Germany, France and Sweden all enjoyed sizeable increases
in export levels over the past year, primarily in military
aerospace markets.
Eastern Europe holds strong backlog
“Military imports for European states West of Russia totalled
$900 million in 2016, and the delivery backlog for these states
currently stands at $4.6 billion for the next five years,
confirming our earlier forecasts,” Moores said.
Russia, the region’s leading exporter and the world’s second
largest exporter, saw a slight decline in 2016 to $6.3 billion.
However, this is not indicative of further decline in the short
term, as Russia has a strong backlog out to 2020.
Asian imports grow despite Chinese cuts
Military equipment imports to East Asia increased from $10.4
billion in 2015 to $12.8 billion in 2016. China has been cutting
import deliveries over the last six years but this has been counter
balanced by South Korea, Taiwan and Japan which have all seen large
increases over the same time frame.
“There remains a slight chance that South Korean exports will
overtake China in 2017 depending on delivery schedules of various
programmes but in the longer term China has a bigger overall
backlog,” Moores said.
The data
Top defence importers (in millions USD)
2016
2017 Saudi Arabia 8,276
Saudi Arabia 7,561 India 3,066
UAE 3,566 UAE
2,437 India 3,551
Egypt 2,367 Australia
3,409 South Korea 2,364
Egypt 2,830 Iraq 2,156
United Kingdom 2,268
Australia 2,138 Algeria
2,212 United Kingdom 2,088
Qatar 2,098 Algeria
1,855 South Korea
2,026 Japan 1,582 China
1,735 Canada 1,570
Turkey 1,707 Qatar 1,539
Japan 1,604
Top defence exporters (in millions USD)
2016
2017 United States 23,258
United States 26,867 Russian Federation
6,336 Russian Federation
7,226 Germany 4,359
France 5,217 France 4,303
Germany 4,357 United Kingdom
4,157 United Kingdom
4,000 Israel 2,425
Israel 2,124 Canada 2,067
Canada 1893 China
1,441 Pan European 1,887
Spain 1,439 Spain
1,494
South China Sea imports (in millions USD)
Importer 2009 2016
2017 Taiwan 517
1,419 1,537 China
1,004 1,228 1,735
Indonesia 1,061 1,272
1,445 Malaysia 789
763 636 Vietnam
434 1,069 470
Philippines 115 478
625
Fastest growing opportunities over the past year
Philippines New Zealand Oman Algeria Chile Belgium Portugal
Luxembourg Colombia Germany
Top global import opportunities over the coming decade
Saudi Arabia $27bn India
$22bn UAE $14bn Indonesia
$9bn Algeria
$9bn
Copyright © IHS Markit 2017
About the Global Defence Trade
Report
The report was created using the IHS Markit Aerospace, Defence
& Security Markets Forecast database, a publicly sourced global
forecasting tool that tracks current and future programs from the
bottom up, looking at deliveries and funds released to industry
rather than budgets. The study covers production, R&D, logistic
support and service revenues where there is an export.
The entire market is covered except for munitions and small
arms; however, anything under 58mm caliber has not been included in
this study. The study only tracked programs with a primarily
military function, removing homeland security and Intelligence
programs. Constant US dollars are used as the study’s base. For
additional information, visit: www.ihs.com/jmf
About IHS Markit
(www.ihsmarkit.com)
IHS Markit (Nasdaq: INFO) is a world leader in critical
information, analytics and solutions for the major industries and
markets that drive economies worldwide. The company delivers
next-generation information, analytics and solutions to customers
in business, finance and government, improving their operational
efficiency and providing deep insights that lead to well-informed,
confident decisions. IHS Markit has more than 50,000 key business
and government customers, including 85 percent of the Fortune
Global 500 and the world’s leading financial institutions.
Headquartered in London, IHS Markit is committed to sustainable,
profitable growth.
IHS Markit is a registered trademark of IHS Markit Ltd and/or
its affiliates. All other company and product names may be
trademarks of their respective owners © 2017 IHS Markit Ltd. All
rights reserved.
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