Hyundai Heavy to get huge ship orders

The Korea Times

The Korea Times

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Mon, December 4, 2023 | 12:43

Companies

Hyundai Heavy to get huge ship orders

Posted : 2015-08-07 16:23

Updated : 2015-08-07 20:06

Hyundai Heavy Industries (HHI), the world's largest shipbuilder, is expected to receive multiple orders for liquefied natural gas (LNG) carriers from GasLog, a Monaco-based shipping firm. / Korea Times file

By Lee Hyo-sik

Kwon Oh-gap
Hyundai Heavy CEO

Hyundai Heavy Industries (HHI), the world's largest shipbuilder, will likely secure multiple orders for liquefied natural gas (LNG) carriers from a Monaco-based shipping firm, according to the company and industry sources, Friday.

If realized, this will significantly boost the bottom line of the struggling shipbuilder, which has suffered staggering losses from its dismal offshore plant business over the past few years.

The company has since begun shunning constructing offshore oil rigs and other resources development facilities amid the falling price of crude oil and other commodities. Instead, it has shifted its focus to making LNG carriers and other high value-added vessels, the areas it knows well.

Hyundai Heavy said it recently completed the development of a more fuel-efficient and environment-friendly LNG carrier in cooperation with GasLog, the operator of LNG ships headquartered in Monaco.

GTT, a French engineering company specializing in system design for the maritime transportation and storage of LNG, and DNV GL, a Norwegian consulting firm specializing in technical inspection and evaluation of vessels, also took part in the four-way project.

GasLog, which plans to increase the number of its LNG carriers from 27 to 40 by 2017, is widely expected to choose Hyundai Heavy over other shipbuilders when it issues new orders, given its growing partnership with the Korean company.

"It is true that we have developed a new type of LNG carrier in cooperation with GasLog," a HHI spokesman said. "We changed the design of a LNG storage tank to contain larger volumes of LNG. But the change is nothing revolutionary. It is just a simple improvement."

The spokesman said the company is hoping to win new orders from GasLog.

"It is good to secure new orders from shipping firms like GasLog, but nothing has been decided yet," he said. "It is just too early to say what will happen."

GasLog operates 19 LNG carriers. It is scheduled to receive eight vessels -- six from Samsung Heavy Industries and two from HHI -- over the next three years. The vessels, capable of carrying 174,000 cubic meters of LNG, are each valued at $200 million.

The shipping firm plans to issue orders for an additional 13 carriers over the next few years, attracting keen attention from shipbuilders around the globe.

Winning new LNG ship orders is crucial for Hyundai Heavy, which has been focusing on building LNG carriers and other merchant ships to generate a stable cash flow.

In the second quarter, Hyundai Heavy posted a 171 billion won operating loss due to its delayed offshore plant projects. In 2014, the company posted a 3.25 trillion won operating loss, the largest in its history.

Its two domestic rivals recorded even larger losses in the second quarter.

Daewoo Shipbuilding & Marine Engineering (DSME) posted a 3.03 trillion won operating loss after reflecting heavy losses on its balance sheet, which sent shock waves across the industry.

Samsung Heavy also posted a 1.55 trillion won operating loss, citing construction delays in several offshore plant projects.

Following their dismal performance, all three shipbuilders announced sweeping restructuring measures aimed at cutting expenses and increasing operational efficiencies. They vowed to dispose of non-core assets and manage manpower more efficiently.

In addition to incurring huge losses from offshore plant projects, Korean shipbuilders have been hit hard by an overall global industry slump. Falling oil prices have also slashed demand for oil tankers and other types of ships. Chinese shipbuilders in particular have caught up with Korean manufacturers, making it harder for local players to win orders abroad.

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