May 17, 2008

South Korean shipbuilders bumper year continues

Yonhap reported that South Korean shipyards, led by Hyundai Heavy Industries Co are raking in massive shipbuilding contracts this year, dispelling concerns that a slowdown in the US economy may pose a threat to the global shipbuilding market.

Hyundai Heavy won USD 5.7 billion worth of new contracts last month, an industry record, buoyed by growing demand for vessels to move consumer goods and fuel. Hyundai Heavy along with its unit Hyundai Samho Heavy Industries Co clinched USD 7 billion worth of orders in the first two months of the year, a great leap from the USD 803 million it received during the same period last year.

According to Mr Lee Young min an analyst at Kiwoom Securities, Hyundai Heavy and its unit Hyundai Mipo Dockyard Co have received orders so far this year equivalent to 25% and 30% respectively of their yearly targets. He added that "Other shipyards such as Daewoo Shipbuilding & Marine Engineering Co and Samsung Heavy Industries Co are also showing a good start in their business this year.”

Mr Cho Joon young an analyst at Shinyoung Securities said that "There have been concerns that shipbuilders' fundamentals may worsen as the troubled US mortgage market may pose a significant risk to the sector. He added that "But local shipyards are defying it.”

Mr Cho said strong demand for ships will remain this year, fueled by growth in China and other emerging economies. According to London based market researcher, Clarkson Plc, global shipbuilders have won a total of 6.38 million compensated gross tonnes in new orders for the first two months of the year, a steep fall of 36.2% YoY. But South Korean shipyards have won a combined 4 million in new orders, accounting for 62.7% of the total shipbuilding orders placed during the cited period. According to Clarkson, the figure was also up 63.3% YoY.

Shipyards in South Korea, the world's top shipbuilding nation, have won record orders in recent years as demand has surged for vessels to transport raw materials to China and goods to the rest of the world. The shipbuilders already have enough orders to keep them busy for about four years. But investors have been worried that the US subprime mortgage crisis could leave global shipping lines facing difficulty in financing new vessel purchases this year, leading to a decline in orders.