IHS Balance of Trade Report 2014

2013 was another strong growth year for defence trade. Traditional markets expanded by USD2 billion to USD67 billion, while some emerging markets started to impact on the structure of the global market. Furthermore, trade patterns are fundamentally changing for the dominant players; for instance, India is now the primary importer of defence equipment from the United States, from a base of just USD0.2 billion in 2009.

The landscape is a particularly fluid one as traditionally strong exporter states experience problems maintaining their market dominance and new entrants establish a foothold. The major change in traditional suppliers came with Italy slipping from sixth to ninth (as Alenia Aermacchi C-27J Spartan transport aircraft deliveries end), and the UK moving past Germany from fifth to fourth largest global exporter as Typhoon deliveries ramp up to Saudi Arabia.

Among the upper tier of exporting countries and companies a number of significant changes are playing out. As highlighted in the IHS Balance of Trade report of May 2013, the emergence of South Korea is of particular note. Seoul is forecast to enjoy higher exports revenue in East Asia than China by 2016, having already overtaken the UK, Italy and Israel in the region.

Regarding purchaser states, India’s level of imports surged in 2013 with deliveries commencing of major US exports, including Boeing P-8 Poseidon maritime surveillance aircraft. This growth is further compounded by the huge backlog of Indian orders and additional requirements such as submarines. Meanwhile, China and Indonesia saw imports increase by around USD1 billion each from 2012 to 2013; China’s demand came from imported engines and made it the largest importer in East Asia (replacing South Korea), while Indonesia started major aerospace deliveries. IHS forecasts that Vietnam, Australia, Mexico and Indonesia will be increasingly desirable export markets over the decade, while European markets and Japan are expected to weaken.

Although the benefits of unmanned systems are sought by the majority of states examined in the report, 2013 was notable in that the international trade in these systems failed to grow; indeed, with the cancellation of Northrop Grumman/EADS RQ-4E Euro Hawk high-altitude long-endurance (HALE) signals intelligence (SIGINT) unmanned aerial vehicle (UAV), the export market slipped from USD0.64 billion to USD0.59 billion. Meanwhile, the trade in aerospace continued to grow, and with Lockheed Martin F-35 Lightning II Joint Strike Fighter (JSF) production deliveries already having started (to the UK and Netherlands), the future of both the market and Lockheed Martin is secure. Other platform markets are projected to enter a relatively lean period: military ships remained a relatively small export market (at USD5 billion in 2013) and military land vehicles will decline through 2014.

At a company level Boeing continues to dominate, and while Raytheon pulled ahead of Lockheed Martin IHS does not expect this to endure given the latter’s strong order backlog. Russian Helicopters and the United Shipbuilding Corporation have both captured increased market share, although the former is running out of backlog. Embraer became the largest exporter to Africa in 2013, with Elbit, Rafael, SAAB and IAI all holding significant stakes in African trade – perhaps surprising given the political dimensions at play in the region.

Overall, 2014 is already forecast to be another growth year, and with a number of major programmes yet to be decided the potential exists for further significant change to exporters and importers as new opportunities and trading partnerships continue to emerge.

  ♞ Janes