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Industry Leaders Increasing Their Dominance in Global Shipbuilding Market
Shipbuilding Industry
Industry Leaders Increasing Their Dominance in Global Shipbuilding Market
  • By matthew
  • August 20, 2013, 09:14
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Korean shipyards are among the best in the world.
Korean shipyards are among the best in the world.

 

The winner-take-all effect is predicted to get stronger as the global shipbuilding market is on a recovery track with restructuring coming close to completion. 

According to Woori Investment & Securities and other industry sources, the placement of orders for the construction of offshore plants and merchant vessels has increased by 48.1% year-on-year in the first half of 2013 on a deadweight ton (DWT) basis, signaling a rebound in the sector. Under the circumstances, Korean shipbuilders have won an increasing number of orders through low priced bidding. 

In the second half of this year, they are likely to veer towards more profitable projects with increased bargaining power. This is because the number of companies capable of building technology-intensive vessels and floating structures such as offshore plants, LNG carriers, and eco-ships is very limited, even though the global shipbuilding capacity has already reached saturation. 

In the first half of 2013, only 18 companies around the world won shipbuilding orders for vessels of at least 35,000 CGT, or compensated gross tonnage, and just nine of them obtained those for ships of 52,000 or more CGT. Hyundai Heavy Industries, Samsung Heavy Industries, and Daewoo Shipbuilding and Marine Engineering took the lion’s share in those segments. In addition, the ratio of the combined order backlog of the top 15 shipbuilders to the total increased from 37% to 44% between July 2010 and June 2013. 

“The industry is reorganizing itself, led by leading shipbuilders with technological competitiveness,” said Yoo Jae-hoon, researcher at Woori Investment & Securities. He continued, “Their profitability will improve from the latter half of this year as they can now focus on more lucrative orders.”

In the first half, the low tonnage value was the main factor of order placement but, more recently, the number of such orders is on the rise owing mainly to concerns over the point of time of delivery and a rising tonnage value, which means the bargaining power of shipbuilders is likely to be further enhanced down the road. 

“Once Chinese shipbuilders are driven out of the market through the restructuring process, their rivals in Korea such as Hyundai Mipo Shipbuilding, SPP Shipbuilding,q and Sungdong Shipbuilding will be able to benefit from it,” said an industry insider.