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Korean Shipbuilders Sign MOUs for Iranian $2.4bn Shipbuilding Projects
Iranian Shipbuilding Orders
Korean Shipbuilders Sign MOUs for Iranian $2.4bn Shipbuilding Projects
  • By marie
  • June 13, 2016, 01:30
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South Korea's shipbuilders have signed preliminary agreements with Iran, but the Iranian counterparts in the talks encounter cash shortages to complete the deals.
South Korea's shipbuilders have signed preliminary agreements with Iran, but the Iranian counterparts in the talks encounter cash shortages to complete the deals.

 

Hyundai Heavy Industries (HHI) and Daewoo Shipbuilding & Marine Engineering Co (DSME) have reached preliminary deals estimated at some US$2.4 billion with an Iranian shipping company and an Iranian petroleum company to build ships, tankers and offshore equipment.

HHI and DSME are in talks with Islamic Republic of Iran Shipping Lines (IRISL) and Iranian Offshore Oil Co. (IOOC) for contracts to build container carriers, bulk carriers and tankers, which together are valued at roughly US$2.4 billion, according to Wall Street Journal on June 7.

However, the efforts have fallen short of reaching official contracts, but just signed memorandum of understandings (MOUs). It also noted the South Korean shipbuilders are in a fierce competition with other foreign shipbuilders including Chinese companies, the US-based economic daily added.

The Iranian government has been working hard to revitalize its economy since the economic sanctions on Iran were lifted early this year. The situations on the ground, however, have turned out to be slow in recovery, which makes the Iranian counterparts in the talks encounter cash shortages to complete these deals. Such a situation might lead to a state-to state crude oil deal where the Korean government gets the crude oil from the Iranian government and gives a cash warranty to the Korean shipbuilders for the 20% down payment.  

Hyundai Mipo Dockyard, a subsidiary of HHI, signed a MOU with IRISL for orders of 10 tankers and at least six handy-size bulk carriers. The Hyundai Heavy is also in talks with IRISL for building around six container carriers with a 14,500 TEU capacity. In this deal, however, HHI is known to be in competition with China’s Dalian Shipbuilding Industry Co. IRISL operates about 115 oceangoing vessels, with a total of capacity of 3.3 million tons. But most of the ships are old, and have been declassified or deemed unsafe to travel. While modernizing vessels, IRISL is chartering ships from foreign shipping companies including Greek carriers.  

DSME is in a negotiation with IOOC to deal orders of at least five jack-up rigs. But the deal also reached just signing a MOU. In fact, rig orders are rare these days as oil prices are low and offshore drilling is expensive, which is raising a competition among major shipyards including Chinese companies.