Shipbuilders provide quality to keep China at Bay

With the number of ship orders to Korean ship builders surging, local ship building companies are experiencing a heyday.
Hyundai Heavy Industries saw its first-quarter profits jump to a record 371 billion won ($402 million) on higher ship prices. Samsung Heavy Industries, which has the world’s largest LNG carrier backlog, said first-quarter profit surged six times year-on-year to 90 billion won.
Korean companies are very competitive when it comes to high-value ships. LNG carriers are one of those markets, and Korean yards grabbed 79 percent of the LNG orders last year, according to Lloyd’s World Shipbuilding Statistics.
Korea took away 40.9 percent of all new orders, in terms of shipping capacity, in 2006, up from 35.5 percent last year.
Korea did even better in dollar value. According to Clarkson Plc, the London based shipbroker, Korea won about half of the $105.5 billion worth of orders last year, and leads the market in both tonnage and monetary terms.
China, however, is catching up fast. For the first three months of this year, China had more ship orders than any other country, including Korea. Experts say this phenomenon is temporary. “Korea is using cutting-edge shipbuilding technology,” said Lee Un-taek, analyst at Daehan Investments & Security. “Japan and China are almost at capacity for building ships. More orders will head to Korea.”
In global competition, Korean companies are moving beyond borders to fill their orders. Hanjin Heavy Industries recently announced it had won a contract on eight 12,800 TEU container carriers for $1.3 billion. A TEU, or transport equivalent unit, is equal to one 20-foot container. A 12,800 TEU ship, therefore, can carry 12,800 20-foot containers.
This is the biggest container carrier to be built so far with the length being longer than 365 meters.
For those following the industry, winning the bid seemed strange considering that Hanjin had no docks to do the actual ship building as it was already operating at full capacity.
To complete the orders, Hanjin prepared a ship building site in the Philippines in May 2006. The ship yard in the islands is about 10 times the size of the current ship yard in Busan. Hanjin got extra orders on three bulk carries worth $240 million from Indian and Turkish owners two weeks ago. CMA-CGM, the world’s third largest container shipping company based in France, signed contracts with the ship builder for 10 container carriers for $690 million.
Hanjin is not alone when it comes to expanding its ship building business abroad. STX Shipbuilding broke ground on its 100-acre ship building site in Dalian, China, last month. It already has orders for $1.1 billion worth of ships including 21 bulk carriers and four car carriers with a capacity of 6,700 cars each.
Daewoo Shipbuilding & Marine Engineering has been one of the pioneers in operating overseas ship building plants. With the Romanian government, it has jointly established Daewoo Mangalia Heavy Industries in Romania. DMHI signed contracts worth $1 billion with the world’s three most important ship owners in the world: Hamburg Sud, Anangel Maritime Services and Tsakos Shipping & Trading.

By Hwang Young-jin Staff Writer [yhwang@joongang.co.kr]