Recovery Seems to Be Clear
A recovery is being made in the Korean shipbuilding industry's new order receipt. Korean shipbuilders were expected to be hit by a dearth of funds this year following a dearth of orders two years ago. As a result, there has been growing concern that if the Korean shipbuilding industry continues to suffer from a slump in winning new orders this year, its industrial ecosystem may be completely destroyed. Fortunately, Korean shipbuilders are relieved as new their orders have been growing ahead of new spring.
According to the Korean shipbuilding industry on February 14, Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering, and Samsung Heavy Industries, which are Korea’s three biggest shipbuilders, began to make a recovery in landing new orders at the end of last year and the recovery has become stronger since the beginning of this year.
Hyundai Heavy Industries won orders for a total of 14 vessels worth US$ 800 million in January this year. The 14 are four times the number of vessels in January of 2017 and are the highest in four years since 2014. In particular, the Hyundai Heavy Industries Group is planning to maintain its positive order flow this year as the company received 21 orders amounting to US$ 1.9 billion for vessels including LNG tankers, very large crude oil carriers (VLCCs) and petrochemical product carriers in December of last year alone.
Recently, Hyundai Heavy Industries was selected as basic design contractor for ASLNG (At-Shore LNG), the world’s first US$500 million offshore LNG export base, which enhanced prospect of landing additional orders.
In addition, Hyundai Heavy Industries is planning to ramp up its capital with consideration by 1.27 trillion won or US$1.14 billion (12.5 million shares) during the first half of this year. With the capital increase with consideration, Hyundai Heavy Industries, Hyundai Mipo Dockyard, Hyundai Samho Heavy Industries will secure net cash of around 500 billion won (US$450 million) while offsetting all of their net borrowings. In effect, they will realize zero-debt management. Hyundai Heavy Industries removed a heavy burden by recently wrapping up a collective bargaining agreement delayed over the past two years, as well.
Daewoo Shipbuilding & Marine Engineering already received orders worth US$400 million to build two LNG tankers and overhaul one special purpose vessel. In particular, the shipbuilder recently booked an order for two LNG tankers for about US$370 million from a US shipowner. This year, Daewoo Shipbuilding & Marine Engineering will deliver 20 LNG carriers, which will be unprecedented in the world, to their ship owners.
Samsung Heavy Industries has also clinched orders amounting to about 1 trillion won (US$900 million) in one month since the beginning of this year, giving a green light to its goal of recording US$8.2 billion in new orders this year. The company recently received an order to build eight 12,000-TEU container ships from an Asian shipowner for about 820 billion won (US$738 million). The vessels ordered this time are Neo Panamax vessels 334 meters long and 48.4 meters wide and will be delivered by May 2021.
Samsung Heavy Industries is planning to complete a capital increase of 1.5 trillion won (US$1.35 billion) with consideration which is the largest among Korea’s Big Three shipbuilders by May this year. From May through June, the shipbuilder will wrap up three-year wage negotiations all together through labor-management wage bargaining.
"Korean shipbuilders that overcame an order cliff crisis are close to receiving urgent financial supports such as a capital increase with consideration this year. However, receiving financial supports will only take effect temporarily. Only fundamental improvements such as business restructurings and a recovery in new orders will be fundamental solutions that can save the shipbuilding industry," said an official of the Korean shipbuilding industry.