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South Korean Shipbuilders Fighting Dwindling Cash Pile
Korean shipbuilders are extending their "emergency mode" to hold onto cash to cope with the prolonged economic downturn.
Selling large amounts of corporate bonds seems sufficient for the time being, but doesn't ease mounting worries over liquidity shortages, analysts say.
It's unlikely ship owners will give new ship orders to Korean shipyards soon, as the wide-spreading global recession has cut demand.
"No massive new orders are expected to come by the third quarter of this year, as European economies are in deep trouble," Kim Hong-kyun, an analyst at Hanwha Securities, said, Monday.
"Korean shipbuilders are urged to take more cost-cutting and funding measures because they will suffer a dearth of new-building contracts by September," according to the analyst. Korea is home to the world's three-biggest shipyards ― Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering and Samsung Heavy. But the trio received only two new orders in February, according to market researcher Clarkson, which said only seven shipbuilding contracts were made globally last month.
Specifically, Samsung Heavy Industries took an order from Brazil for two drill-ships worth $1.4 billion in late November 2008.
No new vessel orders have been reported in either China or South Korea since last September.
"Chances are very dim for the worlds' big three to win new orders in this month and April," an official from Hyundai Heavy said.
"With no new orders, shipbuilders are persuading ship owners to opt for payment delays rather than canceling them," the official added. Meanwhile, the leading Korean shipyards recently asked state-run banks ― the Korea Development Bank and Export-Import Bank of Korea ― for increased loans and extended financing for orders.
"Our financial resources that could be made available for their assistance are limited by the government," according to an Exim Bank spokesman.
"We are ready to lend more to the leading shipbuilders. But the credit line for the shipbuilding sector for this year was set at 1.6 trillion won, meaning there is only 722 billion won left," he said.
To boost cash-holdings through the current slump, the big three players have already issued or are leaning towards issuing domestic bonds.
Samsung Heavy Industries was the first to sell debt this year when it issued 700 billion won in bonds last month.
Hyundai Heavy and Daewoo Shipbuilding also plans to soon issue one trillion won and 500 billion won in three-year bonds, respectively, to the domestic market soon.
"Cash reserves at leading shipyards are drying up. Diversification could be the answer to reap profits after the market eases," WorldYards, a shipbuilding database, said, pointing to the success that Japan's leading shipbuilders have had as a result of diversifying their businesses.
"No massive new orders are expected to come by the third quarter of this year, as European economies are in deep trouble," Kim Hong-kyun, an analyst at Hanwha Securities, said, Monday.
"Korean shipbuilders are urged to take more cost-cutting and funding measures because they will suffer a dearth of new-building contracts by September," according to the analyst. Korea is home to the world's three-biggest shipyards ― Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering and Samsung Heavy. But the trio received only two new orders in February, according to market researcher Clarkson, which said only seven shipbuilding contracts were made globally last month.
Specifically, Samsung Heavy Industries took an order from Brazil for two drill-ships worth $1.4 billion in late November 2008.
No new vessel orders have been reported in either China or South Korea since last September.
"Chances are very dim for the worlds' big three to win new orders in this month and April," an official from Hyundai Heavy said.
"With no new orders, shipbuilders are persuading ship owners to opt for payment delays rather than canceling them," the official added. Meanwhile, the leading Korean shipyards recently asked state-run banks ― the Korea Development Bank and Export-Import Bank of Korea ― for increased loans and extended financing for orders.
"Our financial resources that could be made available for their assistance are limited by the government," according to an Exim Bank spokesman.
"We are ready to lend more to the leading shipbuilders. But the credit line for the shipbuilding sector for this year was set at 1.6 trillion won, meaning there is only 722 billion won left," he said.
To boost cash-holdings through the current slump, the big three players have already issued or are leaning towards issuing domestic bonds.
Samsung Heavy Industries was the first to sell debt this year when it issued 700 billion won in bonds last month.
Hyundai Heavy and Daewoo Shipbuilding also plans to soon issue one trillion won and 500 billion won in three-year bonds, respectively, to the domestic market soon.
"Cash reserves at leading shipyards are drying up. Diversification could be the answer to reap profits after the market eases," WorldYards, a shipbuilding database, said, pointing to the success that Japan's leading shipbuilders have had as a result of diversifying their businesses.
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