Korean Shipbuilders Reclaim Top Spot with July Orders
After a decade-long downturn, HD Korea Shipbuilding & Offshore Engineering, Samsung Heavy Industries, and Hanwha Ocean are gaining momentum in realizing substantial profits. In July, domestic shipyards reclaimed the title of being the world’s top shipbuilding nation from China, a position they lost just five months ago.
On Aug. 14, Hanwha Ocean revealed an operating loss of 159 billion won (US$119.06 million) for the second quarter. Although the deficit narrowed compared to 407.3 billion won in the same period last year, it expanded over twice as much compared to 62.8 billion won in the previous quarter. This expansion in losses was primarily attributed to increased costs such as block processing and outsourcing fees. With this, it seems that Hanwha Ocean’s transition to profitability will likely occur in the latter half of the year, making it the last among the three shipbuilding companies to achieve this turnaround. An official from Hanwha Ocean said, “We are making efforts to achieve a shift into profitability by the end of the year.”
HD Hyundai Heavy Industries and Samsung Heavy Industries, which previously announced their second-quarter performance, have returned to making profits.
HD Korea Shipbuilding & Offshore Engineering, the intermediate holding company of HD Hyundai Heavy Industries’ shipbuilding division, returned to profitability with a consolidated second quarter operating profit of 71.2 billion won. This marked a significant turnaround from a loss of 265.1 billion won in the same period the previous year. On the other hand, Samsung Heavy Industries achieved profits for two consecutive quarters. With a consolidated second quarter operating profit of 58.9 billion won, the company shifted from a loss of 255.7 billion won during the same period last year to profitability. Given the increasing trend of improving profits, it can be seen that Samsung Heavy Industries has broken its eight-year streak of annual losses since 2015.
Orders for the three major shipbuilding companies are currently on a steady upward trend.
As of Aug. 14, HD Korea Shipbuilding & Offshore Engineering has achieved 96.9 percent of its annual target of US$15.74 billion by reaching US$15.26 billion, with a total of 116 vessels. In July, Samsung Heavy Industries set a new record by securing orders for 16 methanol-fueled container ships (16,000 TEU class) amounting to 3.9593 trillion won. With this achievement, Samsung Heavy Industries has won US$6.3 billion in orders, which is 66 percent of its annual order target of US$9.5 billion.
On the other hand, Hanwha Ocean attained only 21 percent of its annual order target of US$698,000 by securing the order for a single LNG carrier worth 332.3 billion won at the end of July, which was the most recent.
All eyes are on how long the current order surge for the three major shipbuilders will continue, given the declining trend in global ship orders. According to Clarksons Research, an analysis firm specializing in shipbuilding and maritime industries, the cumulative global ship orders from January to July of this year amounted to 23.12 million CGT (858 vessels), marking a 25 percent reduction compared to 30.67 million CGT, or 1,170 vessels, of the same period last year. CGT represents the standard tonnage equivalent. During this period, South Korea secured orders for 6.94 million CGT (152 vessels), indicating a 41 percent decrease compared to the corresponding period the previous year.
However, the three leading domestic shipbuilders are expected to secure orders for Qatar-bound LNG carriers valued at US$10 billion (equivalent to 40 vessels) in the second half of the year.
As of July, the three major domestic shipbuilders have risen to the top in terms of global shipbuilding market share. Out of the worldwide ship orders of 3.33 million CGT, or 96 vessels, the three major Korean shipbuilders secured the largest share, accounting for 1.46 million CGT, or 44 percent. This achievement marks the first time in five months that they have surpassed China in market share. In terms of order backlog by shipyard, Samsung Heavy Industries maintains its leading position with 10 million CGT, followed by Ulsan Shipyard of HD Hyundai Heavy Industries and Okpo Shipyard of Hanwha Ocean, solidifying their positions as the global top three.
Note: Article by Kim Eun-jin (www.businesskorea.co.kr)