South Korean Shipbuilders on Edge of Precipice

It has been found that South Korean shipbuilders obtained merely eight contracts in total in the first quarter of this year. Specifically, Hyundai Samho Heavy Industries signed four contracts for 158,000 DWT oil tankers and Hyundai Mipo Dockyard concluded a contract for 50,000 DWT chemical tanker while Yeunsoo Heavy Industry obtained three 6,600 DWT chemical tanker orders from Woolim Shipping.

Under the circumstances, South Korean shipbuilders are focusing on the Iranian market as a breakthrough. However, it is likely that Chinese shipbuilders will dominate it based on the Chinese government’s all-out assistance. After international sanctions were lifted last year, Iran is revamping a large number of its ships for crude oil transport to Europe and Asia. For example, IRISL, the largest shipping firm in Iran, recently announced that it would place orders equivalent to 600,000 TEUs in total and state-run NITC said it would invest US$2.5 billion for new ship orders. According to industry experts, the combined ordering quantity of the two companies is estimated at US$8 billion to US$12.5 billion until 2022.

Still, South Korean shipbuilders are unlikely to win the opportunities as the Iranian companies are asking shipbuilders to provide a shipping finance of up to 95% of shipbuilding costs due to the lack of funds. At present, South Korean shipbuilders are subject to the OECD rules that a government-run financial institution’s shipping finance support cannot exceed 80%.

Hyundai Heavy Industries is currently having talks with IRISL over three 14,500 TEU container carriers. In the meantime, South Korean shipbuilders recorded an order backlog of 27.59 million CGT as of the end of last month, when their Chinese and Japanese counterparts’ totaled 37.56 million CGT and 21.44 million CGT, respectively. The backlog of South Korean shipbuilders was at the lowest level since March 2004.
Source: BusinessKorea