The Korea Times
amn_close.png
amn_bl.png
National
  • Politics
  • Foreign Affairs
  • Multicultural Community
  • Defense
  • Environment & Animals
  • Law & Crime
  • Society
  • Health & Science
amn_bl.png
Business
  • Tech
  • Bio
  • Companies
  • World Expo 2030
amn_bl.png
Finance
  • Companies
  • Economy
  • Markets
  • Cryptocurrency
amn_bl.png
Opinion
  • Editorial
  • Columns
  • Thoughts of the Times
  • Cartoon
  • Today in History
  • Blogs
  • Tribune Service
  • Blondie & Garfield
  • Letter to President
  • Letter to the Editor
amn_bl.png
Lifestyle
  • Travel & Food
  • Trends
  • People & Events
  • Books
  • Around Town
  • Fortune Telling
amn_bl.png
Entertainment & Arts
  • K-pop
  • Films
  • Shows & Dramas
  • Music
  • Theater & Others
amn_bl.png
Sports
amn_bl.png
World
  • SCMP
  • Asia
amn_bl.png
Video
  • Korean Storytellers
  • POPKORN
  • Culture
  • People
  • News
amn_bl.png
Photos
  • Photo News
  • Darkroom
amn_NK.png amn_DR.png amn_LK.png amn_LE.png
  • bt_fb_on_2022.svgbt_fb_over_2022.svg
  • bt_twitter_on_2022.svgbt_twitter_over_2022.svg
  • bt_youtube_on_2022.svgbt_youtube_over_2022.svg
  • bt_instagram_on_2022.svgbt_instagram_over_2022.svg
The Korea Times
amn_close.png
amn_bl.png
National
  • Politics
  • Foreign Affairs
  • Multicultural Community
  • Defense
  • Environment & Animals
  • Law & Crime
  • Society
  • Health & Science
amn_bl.png
Business
  • Tech
  • Bio
  • Companies
  • World Expo 2030
amn_bl.png
Finance
  • Companies
  • Economy
  • Markets
  • Cryptocurrency
amn_bl.png
Opinion
  • Editorial
  • Columns
  • Thoughts of the Times
  • Cartoon
  • Today in History
  • Blogs
  • Tribune Service
  • Blondie & Garfield
  • Letter to President
  • Letter to the Editor
amn_bl.png
Lifestyle
  • Travel & Food
  • Trends
  • People & Events
  • Books
  • Around Town
  • Fortune Telling
amn_bl.png
Entertainment & Arts
  • K-pop
  • Films
  • Shows & Dramas
  • Music
  • Theater & Others
amn_bl.png
Sports
amn_bl.png
World
  • SCMP
  • Asia
amn_bl.png
Video
  • Korean Storytellers
  • POPKORN
  • Culture
  • People
  • News
amn_bl.png
Photos
  • Photo News
  • Darkroom
amn_NK.png amn_DR.png amn_LK.png amn_LE.png
  • bt_fb_on_2022.svgbt_fb_over_2022.svg
  • bt_twitter_on_2022.svgbt_twitter_over_2022.svg
  • bt_youtube_on_2022.svgbt_youtube_over_2022.svg
  • bt_instagram_on_2022.svgbt_instagram_over_2022.svg
  • Login
  • Register
  • Login
  • Register
  • The Korea Times
  • search
  • all menu
  • Login
  • Subscribe
  • Photos
  • Video
  • World
  • Sports
  • Opinion
  • Entertainment & Art
  • Lifestyle
  • Finance
  • Business
  • National
  • North Korea
  • 1

    BTS producer encourages anticipation for future messages from group

  • 3

    Korean shorthairs among favorite cat breeds as more people choose to adopt pets

  • 5

    Uhm Jung-hwa enjoys second heyday with JTBC series 'Doctor Cha'

  • 7

    Tom Cruise to visit Korea to promote new film

  • 9

    REVIEW'The ODD Of LOVE' concert: Taeyeon shows why she is among K-pop's top vocalists

  • 11

    S. Korea, Japan agree to prevent recurrence of maritime dispute

  • 13

    Korea sees record-high number of flu patients for late spring

  • 15

    Concerns rise over Samsung SDS' growing intra-group transactions

  • 17

    Korean bio firms to seek new opportunities at int'l convention in Boston

  • 19

    Shipbuilding stocks rally over hope for 'super cycle'

  • 2

    Senior citizens land low-wage jobs after retirement: report

  • 4

    From hip-hop idols to global superstars, BTS shatters records over decade

  • 6

    LIFE'S OLLE TRAILS 1How hiking Jeju's 437km of trails changed my life

  • 8

    Korea beats Nigeria to advance to semifinals at FIFA U-20 World Cup

  • 10

    3 EXO members file antitrust complaint against SM Entertainment

  • 12

    Korea denies discussion with EU on sending ammunition to Ukraine

  • 14

    Baritone Kim Tae-han wins Queen Elisabeth Competition

  • 16

    Election watchdog under fire for refusing to accept inspection

  • 18

    K-food transforms global culinary industry

  • 20

    Agency launched to offer exclusive support for overseas Koreans

Close scrollclosebutton

Close for 24 hours

Open
  • The Korea Times
  • search
  • all menu
  • Login
  • Subscribe
  • Photos
  • Video
  • World
  • Sports
  • Opinion
  • Entertainment & Art
  • Lifestyle
  • Finance
  • Business
  • National
  • North Korea
Business
  • Tech
  • Bio
  • Companies
  • World Expo 2030
Tue, June 6, 2023 | 18:20
Companies
Korean shipbuilders bracing for fallout from Russia war
Posted : 2022-03-28 09:21
Updated : 2022-03-28 17:25
Kim Bo-eun
Print PreviewPrint Preview
Font Size UpFont Size Up
Font Size DownFont Size Down
  • facebook
  • twitter
  • kakaolink
  • whatsapp
  • reddit
  • mailto
  • link
An LNG-powered crude oil tanker constructed by Samsung Heavy Industries / Courtesy of Samsung Heavy Industries
An LNG-powered crude oil tanker constructed by Samsung Heavy Industries / Courtesy of Samsung Heavy Industries

Delays in payments from Russia's ship owners could place Korean shipbuilders at disadvantage in competition with Chinese rivals

By Kim Bo-eun

HONG KONG ― Russia's invasion of Ukraine, which has added to disruptions caused by the ongoing coronavirus pandemic, has created increasing uncertainty for most industries, with shipbuilding one of them.

South Korean and Chinese shipbuilders rank among the industry's top players, and as tensions are growing, the impact of the geopolitical decisions made in both Seoul and Beijing over the Ukraine crisis are starting to filter through.

Firms in Korea face the risk of delayed payments from Russian owners as Seoul has supported sanctions banning major Russian banks from the Swift international payments network.

Shipbuilders could also encounter problems in securing new contracts with Russian owners, as well as the growing competition from China, after Korea was listed as an "unfriendly" country by the Kremlin earlier this month.

Moscow has indicated that firms in countries on the list would need to obtain its approval for business transactions.

"Russia-linked orders are heavily focused on liquefied natural gas (LNG) ships from Korean yards, with Samsung Heavy Industries the most exposed," said Adam Kent, managing director at Maritime Strategies International.

He did note that the immediate impact on the global shipping industry would likely be minimal, given ships linked to Russia account for only 2.5 percent of the global order book.

Samsung Heavy Industries is reported to be delaying the delivery of two LNG carriers that are due this month.

Reports also stated that the company has the largest backlog of orders from Russian entities among Korea's top three shipbuilders, totaling $5 billion.

"Nothing has been decided as of yet with regards to the Russia situation," a Samsung Heavy Industries spokesman said.

Korea Shipbuilding & Offshore Engineering, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering are South Korea's main three shipbuilders, and they are reported to have contracts with Russian entities valued at around $6.5 billion, which includes LNG carriers and equipment.

For contracts secured years earlier, shipbuilders have received initial and ongoing payments, with around 20 percent paid when the contract is signed.

"It takes five to six years for carriers to be built and more than 60 percent of the payment is made when the carrier is delivered," said a spokeswoman with a Korean shipbuilder, who asked not to be named due to the sensitive nature of the situation.

"For us, there is still a lot of time until we reach this stage for our contracts."

Shipbuilders are also considering scenarios where Russian entities are unable to make payments should sanctions in response to the invasion be extended.

"If this is the case, shipbuilders can look to other markets," the spokeswoman added.

"We do not see the risks as being too great, but given we are unable to tell how the situation will unfold, we are closely monitoring related matters."

Under the current situation, Korean shipbuilders are likely to delay the completion and delivery to Russian firms, given the payment risks.

"Given [Daewoo Shipbuilding & Marine Engineering] is building two LNG barges and three Arc7 LNG carriers for Russia, risks need to be checked," Daishin Securities analyst Lee Dong-heon said.

"While the company has relatively greater competitiveness in LNG carrier-building technology, and has hit the trough when it comes to earnings, fuelling expectations for improvement in the mid-to long-term, it needs to improve its financial structure and check the situation relating to Russia."

An LNG-powered crude oil tanker constructed by Samsung Heavy Industries / Courtesy of Samsung Heavy Industries
Korea Shipbuilding & Offshore Engineering's large crude oil tanker, top, and Daewoo Shipbuilding & Marine Engineering's LPG carrier / Courtesy of each company
Questions are also arising over whether the status quo could benefit China's shipbuilders, who have contracts with Russian shipowners, but who are not set to be limited by sanctions as Beijing has yet to support Western moves against Moscow.

The two countries are engaged in a heated race for the title as the top shipbuilding nation, with China overtaking Korea in new global orders last year after attracting 49 percent compared to 38 percent.

"Chinese shipyards are also positioning themselves well, when it comes to improving vessel efficiencies and reducing emissions, having already constructed LNG dual-fuelled, methanol-fuelled and ammonia-ready ships," Kent added.

"China isn't currently capable of constructing ice class LNG carriers, so it is difficult to see how China can, in the near future, benefit significantly from the breakdown in relationship between Russia and Korea."

China has been increasing its share with cost competitiveness, but Korean shipbuilders are on their toes as China has quickly caught up in constructing high-value added LNG carriers.

"As shipbuilding is a highly capital-intensive industry, strong government support and political stability is prerequisite to survive this industry which gives an edge to the Chinese shipbuilders over the other players across the globe," Allied Market Research said.

The race for new orders is still neck-and-neck, with Korea beating its competitor in new global orders in February after attracting 67 percent compared to 26 percent, according to market tracker Clarkson Research.

"The shipbuilders with the most advanced technology do not necessarily secure the largest number of orders. Given there is a limit to production capacity, when shipbuilders reach their capacity, they tend to focus on more profitable contracts for high-value-added carriers," said the spokeswoman with the Korean shipbuilder.

The conflict in Ukraine is projected to weigh on the shipbuilding industry for the remainder of the year.

"Beyond direct connections with Russia, the impact on the shipbuilding industry will be mediated through the change in demand for new builds due to the economic fallout of sanctions and high energy prices on the global economy, with Europe especially exposed to risk," Kent said.

Allied Market Research said the turmoil in energy markets owing to Russia's invasion of Ukraine could bolster the shipbuilding industry.

"There is a market expectation that demand for shipping LNG will witness a considerable rise owing to replacements of Russia's gas transported via pipelines," it said.

"The Russia-Ukraine war has forced countries such as Germany, which imports a considerable amount of LNG from Russia, to rethink their energy policies about importing gas."



Emailbkim@koreatimes.co.kr Article ListMore articles by this reporter
 
wooribank
Top 10 Stories
1Korean shorthairs among favorite cat breeds as more people choose to adopt pets Korean shorthairs among favorite cat breeds as more people choose to adopt pets
2Agency launched to offer exclusive support for overseas Koreans Agency launched to offer exclusive support for overseas Koreans
3[ANALYSIS] S. Korean economy feared to follow in Japan's footsteps ANALYSISS. Korean economy feared to follow in Japan's footsteps
4Korea's export dependency on China dips below 20% Korea's export dependency on China dips below 20%
5Retail investors bet on wrong horse despite KOSPI rally Retail investors bet on wrong horse despite KOSPI rally
6Retailers use recycled, biodegradable plastic to attract eco-conscious consumers Retailers use recycled, biodegradable plastic to attract eco-conscious consumers
7Memorial event to be held for fallen Thai soldiers of Korean War Memorial event to be held for fallen Thai soldiers of Korean War
8Stats agency to use Naver's AI chatbot to offer tailored data for firms Stats agency to use Naver's AI chatbot to offer tailored data for firms
9HD Hyundai, Hanwha Ocean to compete in Busan to sell naval ships HD Hyundai, Hanwha Ocean to compete in Busan to sell naval ships
10Korea pushes digital technology exports to Middle East, Japan, ASEAN Korea pushes digital technology exports to Middle East, Japan, ASEAN
Top 5 Entertainment News
1[REVIEW] 'The ODD Of LOVE' concert: Taeyeon shows why she is among K-pop's top vocalists REVIEW'The ODD Of LOVE' concert: Taeyeon shows why she is among K-pop's top vocalists
2Baritone Kim Tae-han wins Queen Elisabeth Competition Baritone Kim Tae-han wins Queen Elisabeth Competition
3Busan Film Festival accepts director Huh Moon-yung's resignation Busan Film Festival accepts director Huh Moon-yung's resignation
4[INTERVIEW] 'One Day Off' star Lee Na-young, director on creating subtle, feel-good series INTERVIEW'One Day Off' star Lee Na-young, director on creating subtle, feel-good series
5'HyeMiLeeYeChaePa' producer Lee Tae-kyung hopeful of second season 'HyeMiLeeYeChaePa' producer Lee Tae-kyung hopeful of second season
DARKROOM
  • Turkey-Syria earthquake

    Turkey-Syria earthquake

  • Nepal plane crash

    Nepal plane crash

  • Brazil capital uprising

    Brazil capital uprising

  • Happy New Year 2023

    Happy New Year 2023

  • World Cup 2022 Final - Argentina vs France

    World Cup 2022 Final - Argentina vs France

CEO & Publisher : Oh Young-jin
Digital News Email : webmaster@koreatimes.co.kr
Tel : 02-724-2114
Online newspaper registration No : 서울,아52844
Date of registration : 2020.02.05
Masthead : The Korea Times
Copyright © koreatimes.co.kr. All rights reserved.
  • About Us
  • Introduction
  • History
  • Contact Us
  • Products & Services
  • Subscribe
  • E-paper
  • RSS Service
  • Content Sales
  • Site Map
  • Policy
  • Code of Ethics
  • Ombudsman
  • Privacy Statement
  • Terms of Service
  • Copyright Policy
  • Family Site
  • Hankook Ilbo
  • Dongwha Group