Order Receipts below 70% of Targets
With only two months remaining for this year, none of Korea’s big three shipbuilders have reached 70% of their annual order receipt goals. If this trend holds, the three shipbuilders will hardly achieve their annual order targets.
As the shipbuilders are struggling to attain their order targets, some industry watchers point out they have set unreasonable targets in the first place. Unless the shipbuilders reach their targets, some of them will have to cut their workforce again at the end of this year.
According to the shipbuilding industry on Oct. 30, Hyundai Heavy Industries reached 64.7% (US$6.5 billion) of its annual goal, Daewoo Shipbuilding & Marine Engineering Co. (DSME), 63% (US$4.6 billion) and Samsung Heavy Industry, 60% (US$4.9 billion). All of their achievement rates were in the 60% range.
"Although it is a real challenge for the three Korean shipbuilders to reach the targets under these circumstances, we still have a hope as we have two months to go this year," said an official of the shipbuilding industry. “Fortunately, new orders for high-priced liquefied natural gas (LNG) carriers have been steady. Korean shipbuilders are in a mood to do everything they can do to reach their goals."
Some experts say that Korean shipbuilders made an overly rosy forecast early this year. They note that the shipbuilders failed to predict the shipbuilding market accurately. Shipbuilders say that their order targets for this year include offshore projects but they have not been able to win orders in this field as they were scratched off early in competition or some of the projects were delayed.
DSME made desperate efforts to land the Rosebank Oil and Gas Field project. But the bidding process has been delayed and will not be completed within this year. Samsung Heavy Industries was dropped out of the race for the Rosebank project in the second quarter.
The company is waiting for the outcome of the bidding for the Reliance project to be announced. "The results of the bid for the Reliance project are being delayed, although the bidding process has been completed,” said a representative of Samsung Heavy Industries. “We cannot definitely say that the announcement will be made next year. There is still a possibility that the results will come out within this year."
Korean shipbuilders are scheduled to announce their earnings on Oct. 31. Hyundai Heavy Industries and Samsung Heavy Industries are highly likely to continue to remain in the red in the third quarter. If new order receipts do not increase and earnings do not improve, a restructuring is highly likely to sweep the shipbuilding industry again.
DSME concluded an agreement with creditors to cut its workforce to 9,000 by the end of this year. At the beginning of this year, Jung Sung-rip, CEO of DSME, said that the company needs not reduce its workforce if it wins large marine projects or shipbuilding orders increase. However, if order receipts do not increase significantly this year, 900 of 9,990 employees should be immediately laid off.