S.Korea: More dark days for shipbuilders in 2010

The year 2010 began with widespread economic optimism, with most of the nation's major industrial sectors expecting continued improvement in business conditions. Korea's shipyards, however, are bracing for another year of hardship as overcapacity continues to plague the global shipbuilding industry, with new orders scarce and ship financing still difficult, experts and industry officials said yesterday.
"The economy is set to continue recovering in 2010, but the shipbuilding sector is likely to be in a slump for a considerable time, stemming from global overcapacity and weakness in the shipbuilding financing market," Min Keh-sik, vice chairman & CEO of Hyundai Heavy Industries Co. said in his New Year address on Monday.
"It will be another challenging year," he said.
The world's largest shipbuilder had suffered a 96 percent drop in new shipbuilding orders in 2009. It received orders for 10 vessels, worth $440 million, which is a sharp contrast to the previous year's 109 vessels, and a combined value of $13.6 billion.
Total orders received in 2009, including offshore platforms and other products, amounted to $10.6, the company said on a Dec. 31 filing.
The Ulsan-based firm has set a 2010 target at $17.7 billion in total orders.
Daewoo Shipbuilding & Marine Engineering Co., the world's third-largest shipbuilder, said that it aims to win $10 billion worth of orders this year.
Nam Sang-tae, the company's CEO, stressed a focus on developing a new revenue source, as the market for container ships continues to be in a slump.
"In order to survive, we need to develop new, high-value products that combine technologies for offshore platforms and conventional vessels," he said.
Korea's three shipbuilding giants -- Hyundai Heavy, Samsung Heavy Industries Co. and Daewoo Shipbuilding -- may be in better shape, compared to smaller players.
Thanks to past efforts to diversify revenue sources, the trio has relatively bigger presence in areas that are less affected by the slump, such as offshore platforms, analysts said.
The market for bulk carriers, oil tankers and container ships is in a sharp downturn with major shipping lines such as CMA CGM SA and China Ocean Shipping Group Co. canceling orders and seeking delays in delivery, after global economic recession cut maritime trade.
In an indication of the challenge facing smaller yards, Hanjin Heavy Industries and Construction Co., the nation's fifth largest shipbuilder, said that it will slash its shipbuilding labor force by at least 30 percent.
The Korea Institute for Industrial Economics & Trade forecast in its recent report that the country's shipbuilding volume this year will drop 10.7 percent in 2010, from a year earlier.
"Exports (of ships) will likely drop 6.2 percent to be valued at $46 billion," the institute said.
As of Dec. 1, order backlogs at Korean yards stood at 53.76 million CGT, or compensated gross tons, according to Clarkson, the world's largest ship broker. That accounted for 34.3 percent of the global market.
Home to seven out of the world's top 10 shipbuilders, Korea once dominated the global market. But, China wrestled the title of the world's No. 1 shipbuilding nation from Korea last year. Chinese yards have a combined order backlog of 54.67 million CGT and a market share of 34.9 percent, the Clarkson data showed.