Shipbuilders closely chased by Chinese rivals
A Samsung Heavy Industries’ vessel being launched at a port in Geoje Island, South Geongsang Province, in this 2013 file photo. Together with Daewoo Shipbuilding & Marine Engineering and Hyundai Heavy Industries, the big three local builders have been troubled with losses and decreasing orders. / Yonhap
By Park Jin-hai
Troubled local shipbuilders have let their Chinese rivals break their long dominance for the first time.
A Chinese shipbuilder emerged as the world's fifth largest player by order backlog in November, data showed Tuesday, posing a threat to Korean shipyards which had been dominating the top five list for years.
The data compiled by Clarkson Research Services showed that Shanghai Waigaoqiao Shipbuilding had an order backlog of 3.03 million compensated gross tons (CGTs) as of the end of November, overtaking Hyundai Mipo Dockyard’s place, which slipped to sixth place at 2.84 million CGTs.
An order backlog is an order that has not yet been fulfilled and is a barometer of a shipbuilder’s future growth.
Daewoo Shipbuilding & Marine Engineering (DSME) ranked first with 8.24 million CGTs, followed by Samsung Heavy Industries with 5.03 million CGTs and Hyundai Heavy Industries with 5 million CGTs, the data also showed.
Hyundai Samho Heavy Industries came fourth with 3.92 million CGTs.
The five Korean shipbuilders have long been the top five so far; but experts warn that Chinese and Japanese shipbuilders could catch up with them next year as they have less room to win new orders due to snowballing losses and industry-wide downsizing, as well as global slump sweeping the industry.
“China with so many shipyards has been the top in terms of aggregated orders. However the top five players have been Korean companies for years,” said an industry insider. “As local firms faced financial difficulties this year, their places were threatened by Chinese rivals.”
Chinese shipyards also took seventh and eighth places, narrowing the gap with local ones, with two Japanese shipyards closely behind.
Local shipbuilders are all suffering from losses. DSME, after posting a 3 trillion deficit in the second quarter, has seen a 1 trillion operating loss in the third quarter. Hyundai Heavy Industries is taking massive belt-tightening measures, as is Samsung Heavy Industries.
“Chinese government is at the forefront in solving the problems of the shipbuilding industry. That is not the case for Korean shipyards,” said the industry source.
The global order backlog as of early December has posted a 9.7 percent slump at 173 million CGTs, compared with January, according to data compiled by the Export-Import Bank of Korea, released Tuesday.
Korea’s order backlog has decreased at 31.1 million CGTs.
The 2016 outlook has been worse, with the bank predicting that Korea’s total order will fall 27 percent to 8 million CGTs at best, with the order backlog losing another 15 percent to 26.5 million CGTs.
“A turnaround in the shipbuilding industry is not likely for a long while,” said Kang Dong-jin, an analyst at HMC Investment Securities. “The oversupply of container ships and emergence of giant shipbuilders through mergers could worsen local shipyards’ price competitiveness. Also, weak oil prices will increase uncertainties of the market,” he added.