Resurgent Korean shipbuilders dominate in July

Korean shipbuilders took roughly half of global shipbuilding orders in July, beating Chinese and Japanese competitors.

Korean companies have held onto the top spot in shipbuilding orders for three months in a row, despite tough competition from China.

According to data from British market tracker Clarksons Research Tuesday, local shipbuilders won orders to build 10 ships totaling 270,000 compensated gross tonnage (CGT) last month. CGT is commonly used in the shipbuilding industry as an indicator of the amount of work that is necessary to build a given ship.

Considering there were 550,000 CGT orders to build 25 vessels in July, Korean firms took roughly half the global orders.

Chinese companies bagged 200,000 CGT orders to build 11 vessels in the same month, coming second after Korea. Japanese shipbuilders followed with just 30,000 CGT orders to build one ship.

Still, Chinese firms are far ahead of Korea in terms of accumulated orders won this year through July and by current order backlog.

Chinese shipbuilders have won 4.74 million CGT orders to build 197 ships through July, taking 40 percent of this year’s global orders. Korean players come in second with 3.74 million CGT orders to build 92 ships, winning 32 percent the global orders. Japan, in third place, is trailing with 1.45 million CGT orders to build 78 ships, bagging 12 percent of global orders.

In terms of order backlog, Chinese players are also leading with a 27.95 million CGT backlog, followed by Korean companies at 20.31 million CGT and Japanese players with 13.65 million CGT.

Korean shipbuilders were the only ones that saw their backlog grow in July compared to the previous year.

According to the research firm, Chinese companies’ order backlog fell by 9 percent year-on-year in July and Japanese firms’ backlog fell 24 percent. Korean shipbuilders’ backlog increased by 2 percent.

“Korean shipbuilders are focusing on building higher-end ships like liquefied natural gas carriers, and we are expecting more orders for LNG-related ships ahead of stricter regulations for sulfur oxide emissions next year,” a spokesperson from Samsung Heavy Industries said.

Ships have to use marine fuel with a sulfur content of no more than 0.5 percent from January 2020, a huge cut from the current limit of 3.5 percent following guidelines from the International Maritime Organization.

While Korean shipbuilders strive to recover from management difficulties in 2016 spurred by oversupply and order drought, potential risks include ongoing protests by labor unions against the merger of Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering (DSME). The two companies are seeking approval from foreign antitrust authorities to finalize the planned takeover.

With workers back from summer vacation this week, all three major shipbuilders - Hyundai Heavy, DSME and Samsung Heavy Industries - need to ink new wage deals. Labor unions could file to strike if negotiations do not go well.

Waning trade due to the ongoing trade war between the United States and China as well as trade conflict between Korea and Japan also remains a risk. Already, global shipbuilding orders have shrunk by 43 percent in the first seven months of this year compared to 2018.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]