Dry spell for S.Korean shipbuilders may drag on

South Korean shipbuilders have enjoyed a number of massive orders over the past two months, but it is still too early to say the sector is climbing up from the bottom, analysts said. According to London-based market researcher Clarkson Plc., South Korean shipyards received orders equivalent to 716,097 compensated gross tons (CGTs) in November, taking up 71.7 per cent of worldwide total new orders, compared to the 255,895 CGTs won by Chinese rivals.
Local shipbuilders also reported a series of new orders this month. So far in December, Daewoo Shipbuilding & Marine Engineering Co., the world's third-largest shipyard, has secured orders valued at US$2.2 billion. The company has won deals to build 29 ships for US$3.75 billion over the course of the year.
Samsung Heavy Industries Co., the world's second-biggest shipyard, is also expected to secure an order from Greece to build three vessels valued at US$195 million. Other smaller rivals such as STX Offshore & Shipbuilding Co. have also won a bunch of deals in the past two months.
Despite the sudden pickup in business, fears remain the industry's dry spell could last longer than expected.
"Because new orders were not placed in the first half of the year, the sector appears to have bottomed out," said Hong Sung-in, an analyst at the state-run Korea Institute for Industrial Economics and Trade (KIET). "But it is unclear whether the trend will continue into next year."
Global contracts for new vessels in the first 11 months of the year plunged 83 per cent from a year earlier, according to Clarkson.
South Korea, home to seven of the world's top 10 shipyards, has clinched record-high orders in the past few years on strong demand for crude carriers and offshore exploration equipment amid lofty oil prices.
But orders for new vessels have sunk since the third quarter of last year, as the credit crisis and the subsequent global recession have prodded companies to postpone delivery dates or cancel orders.
Song Jae-hak, an analyst at Woori Investment & Securities, was also cautious, saying the global shipping industry is still in a dire situation and that financing conditions have not fully recovered.
"Local shipbuilders are expected to see a slight rise in new orders next year as the global economy emerges from the worst of the downturn," said Kim Hong-gyun, an analyst at Hanwha Securities Co. But he added that new orders will not be enough to trigger a new boom in the shipbuilding sector.