Troubled Shipbuilders Bet on Cruisers, Icebreakers
By Kim Hyun-cheol
Staff Reporter
Amid lingering uncertainty surrounding sales of containers and tanker ships, local shipbuilders are turning setting their sights on higher-valued cruise and ice-breaking vessels.
Daewoo Shipbuilding & Marine Engineering (DSME) is reportedly in talks with a Greek shipping company over the construction of a mid-sized cruise ship. The deal is expected to be finalized in the first half of this year, industry watchers say.
The world's third-largest maker by order value has been preparing to tap into the new business for the past few years, with the launching of an independent division for cruise ship deals. DSME is also conducting a joint project with Seoul National University for technology development in the field.
Earlier, Samsung Heavy Industries, the world's No. 2 shipbuilder, won its first cruise bid in a $1.1-billion contract with California-based Utopia Residences in November last year.
The company, which has been seeking to advance into the cruise ship market for over a decade, plans to deliver the high-profile vessel in 2013.
Another local shipbuilding firm, STX, is approaching the field in a different way than the other two. It embarked on STX Europe in 2008, after taking over Norwegian-based Aker Yards.
With a total of 15 overseas shipyards, it is now manufacturing three cruise ships ordered from its Italian and U.S. clienteles between 2006 to 2007 with their combined value over 2 billion euros ($2.74 billion).
STX Europe expects to receive a new order this year, after a drought last year. "Negotiations are underway with cruise operators in Europe and the United States," a company spokesman said.
Celebrating the embarkment of its first icebreaker, Korea is also gearing up to make more of the special-purpose vessels.
Indeed, the country's history of their development traces back to before the launching of Araon in December. In 2005, Samsung Heavy developed the world's first ice-breaking tanker and sold three vessels to Russian shippers.
STX Offshore & Shipbuilding has also recently jointly developed an icebreaking container ship with its brother company STX Europe.
Positive market outlooks are the biggest reason to attract Korean shipbuilders to the unbeaten track. In December, the Cruise Lines International Association forecast passengers taking cruises worldwide this year will grow 6.4 percent from 2009 to 14.3 million people.
Ice-breaking ships also have a good chance of finding buyers soon, as arctic-navigating routes are under a brightening spotlight as a new shipping lane linking Asia and Europe, STX says.
Cruise ships are more profitable than tankers. The Oasis of the Seas, the world's largest cruise ship built by STX Europe in its Finnish dockyard, is equal to seven to eight containers costing 1.01 billion euros.
However, exporters still say such prospects are not likely to lead to immediate profits for the builders.
"As new players, Korean shipbuilders will suffer some additional costs of 'entry expenses' before settling down in the cruise ship market during their early years as well as lingering risks," an analyst of a local brokerage said on condition of anonymity.
"The same goes for the icebreaker market because it's not even formed on solid ground yet."