HHI, Samsung expect mild upturn in ship orders

By Park Ji-won

The nation's top three shipbuilders ― Hyundai Heavy Industries, Samsung Heavy and Daewoo Shipbuilding ― are expected to show a gradual improvement next year on hopes of increased demand for high-end vessels.

Market analysts and officials expect the global shipbuilding market to remain weak throughout next year as demand for value-added vessels from big ship owners is still weak.

They said the three should continue restructuring and scaling down their key businesses to save costs and improve management efficiency.

"As the shipbuilding market is being commoditized, Korean manufacturers have shifted their eyes on premium vessels such as liquefied natural gas (LNG) carriers," said Shinhan Investment analyst Kim Hyun.

Samsung Heavy recently put together a team for shipbuilding and offshore plants for large projects after major management restructuring.

"We will increase investment in research for LNG carriers to overcome today's market uncertainties and to strengthen our flagship products, such as drill ships, in offshore business next year," a Samsung official said.

Daewoo Shipbuilding, which posted comparably steadier growth than other shipbuilders, plans to restructure its business units further and to expand its LNG carrier business.

"Daewoo has begun expanding its LNG business," said analyst Kim.

Market analysts said the growing popularity of shale gas might awaken the idle demand for premium vessels.

“Thanks to the rising exports of LNG products followed by the rise of shale gas in North America, LNG carriers will be more in demand,” said LIG Investment analyst Yang Hyung-mo.

Yang added that there would be more orders for large container carriers because large shipping companies such as Maersk plan to expand orders.

Maersk Line’s chief executive recently said the company would need about 30 container ships by 2019, according to media reports.

On a related note, the three shipbuilders said they had failed to meet this year's order target, because of weakening oil prices and the growing number of Chinese rivals.

According to a recent HMC Investment Securities report, the three carriers had won orders worth $30.8 billion by the middle of December this year, 70.3 percent of their target for the year.

The main reason was falling orders for drill ships in particular, the report said. Orders for drill ships and offshore plants fell 17.6 percent to $11.2 billion this year from $13.6 billion year-on-year.

“Falling oil prices globally are largely responsible for poor orders in the offshore sector,” said HMC Investment Securities analyst Kang Dong-jin.