Posted on 29 August 2007

 

South Korean shipbuilders are maintaining their supremacy in the global market, enjoying record sales for vessels.

 

New contracts in the second quarter swelled to $20.86 billion from $9.9 billion a year ago, according to data from the Ministry of Commerce, Industry and Energy. Also the backlog rose to $121.6 billion, an amount analysts say will keep the dockyards busy for the next several years.

 

Market watchers say demand for new vessels is likely to continue at least for the next three years, adding that expanding commerce between China and the U.S. and Europe is prompting shipping lines to buy more vessels.

 

European countries are accelerating their efforts to phase out single-hulled tankers, slated for 2015. These countries are also to ban vessels that are 15 years old or more from loading heavy fuel oil within 200 miles of their coastlines.

 

According to a study from Clarkson Research, container trade is expected to grow at 2 percentage points faster than the supply of ships this year.

 

Analysts say shipbuilders are signing more orders for vessels that carry liquefied natural gas (LNG), liquefied petroleum gas as well as ships capable of carrying more than 7,100 20-foot containers, which yield much higher profits than ordinary cargo ships. These vessels accounted for around 20 percent of total orders in the first half, up from 13.9 percent last year.

 

Tankers for LNG are among the largest and most complex cargo ships. The nine shipbuilders won orders for 121 container carriers during the first half, more than the 119 for all of last year, and also contracted for 55 bulk carriers, compared with none in the previous two years, according to the ministry.

 

Aggressive Investment

 

Riding on these brighter market prospects, South Korean shipbuilders are expanding shipbuilding facilities to meet rising orders.

 

Hyundai Heavy Industries, the world's largest shipbuilder, will spend 180 billion won on a new shipbuilding plant that it will start construction in the second half of 2009.

 

The new facility, which will be built in the southeastern city of Pohang, will increase Hyundai's yearly total output to 3.35 million metrics tons from the current 3.2 million tons.

 

Samsung Heavy Industries, the world's second-largest shipbuilder, also plans to invest 270 billion won over the next three years in building a block assembly plant in Geojedo, South Gyeongsang Province. The new factory will enable the shipbuilder to produce an annualized 100,000 tons of more blocks on 288,000 square meters of land.

 

Daewoo Shipbuilding is set to expand its shipbuilding capacity further by lengthening its second dock in the southern city of Okpo to 570 meters from the current 380 meters by the end of 2009. Daewoo expects the new addition to allow the company to build an additional 10 large vessels every year.

 

Analysts say more investments will be needed in order to expand successfully.

 

``South Korean shipbuilders are gearing up to find a new growth engine. Although short-term prospects in the market are positive thanks to a strong demand for vessels, the shipbuilders cannot guarantee their future without increasing production efficiency,'' says Lee Jae-won, an analyst from Tongyang Investment and Securities.

 

Analysts also added, shipbuilders were facing fears that they may lose contract opportunities of pricey vessels without increased production capacities.

 

``The news that Hyundai will construct the largest ever dock boasting 1 million tons in its Ulsan shipyard, reflects worries that aggressive investment will be a winning card to gain more profits,'' an analyst from local securities said.

 

Hyundai hopes its new dock will generate an additional 2.5 trillion won in annual revenue, while Daewoo expects the new lengthened dock to create another 1 trillion won in revenue.

 

Some analysts say the danger in pulling out all the stops to meet ship owners' demands, the market will become oversupplied, leading to a slump in freight rates and asset values. But such possibilities seem unlikely as Chinese shipbuilders are trying to bolster their presence centering on bulk and LNG tankers.

 

``It's too early to say that `China Fears' will materialize soon. South Korean shipbuilders have two or three years more time to tackle challenges from China. Market watchers say the challenges will be realized starting from 2010,'' an official from Hyundai Heavy said.

 

Korea Times, August 28, 2009

 

 

 

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