Declining Fortunes
Formerly ranked 13th in the local economy as a giant in shipping and shipbuilding, STX Offshore and Shipping Co. may forever disappear into the sunset.
While other shipbuilding companies are zeroing in on landing orders on the back of the shipbuilding industry’s rebound, STX’s Jinhae and Busan shipyards are facing restructuring and shutdown, respectively.
Its overseas affiliates such as STX Dalian, STX France, and STX Finland are struggling with little or no orders, so they are out for sale or the shipyards are being emptied out.
According to the industry on April 29, STX’s local shipyard Jinhae and Busan Shipyards are seeing a big cutdown in the payroll this year, and their workload is significantly reduced as the finished ships have been delivered already.
On top of this, workers are flocking out the mill as the company’s employees’ and affiliate’s employees’ back wages are mounting.
It has been known that some STX shipyards inevitably have to close down such as Busan STX, which is slated to shut down in June.
An associate well versed in the company says, “Busan STX virtually will have no workload once two Dongwon Industries’ ships and one LPG ship are constructed by July. I know as a fact that Busan STX will close down as of the end of June.”
The story is not too different for Jinhae Shipyard. According to Clarkson Research that specializes in international shipping and shipbuilding market status analysis, STX’s Jinhae shipyard’s backlog orders stood at 80 at the end of last year, a drop of 45 ships from 2012 year-on-year.
This year, the first quarter’s backlog orders halved from last year, since it fell from 110 to 62 year-on-year.
Individual shipyards face dismal figures too. Out of STX’s seven shipyards, Jinhae has a backlog order of 62, Busan has 6, China’s Dalian has 54, and France and Finland have 2.
One industry associate put it, “At this rate, all shipyards will be completely emptied out for a dearth of orders. Even in Gyeongsangnamdo, the birthplace of STX Shipbuilding, the name is fading away.”
Last year, STX Offshore and Shipping Co. recording sales of 3.35 trillion won (US$3.25 billion), but suffered from red figures such as an operating loss of 2.36 trillion won (US$2.3 billion) and a net term loss of 4.7 trillion won (US$4.6 billion).
Their sales saw a 46 percent drop year-on-year, while the operating loss surged 238 percent. The term net loss expanded 420 percent year-on-year, and with -2,105 percent as their gross capital/capital ratio, the company completely ate into its capital.
The company stayed at the big number four spot in global shipbuilding just up to a few years ago, together with local companies such as Hyundai Heavy Industries, DSME, and Samsung Heavy Industries, but last year it was ousted from the top 10 list.
After the first quarter this year, it was beaten by Chinese shipyards.
As if to put salt in the wound, the company may be forced to file for court receivership for its Chinese Dalian shipyard.