Shipbuilders seem set to escape the doldrums

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Shipbuilders seem set to escape the doldrums

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A shipbuilding yard in Tongyeong, South Gyeongsang. [JoongAng Ilbo]

With global shipbuilding orders surging nearly 40 percent in the first half of this year compared to the same period in 2012, market observers suggest the industry has a good chance of overcoming prolonged sluggish demand.

Clarkson Research Services, which tracks the shipbuilding industry, said new orders in the first half of 2013 amounted to 749 ships.

Korean shipbuilders’ global orders by compensated gross tonnage (CGT), a measure of a ship’s size and complexity, surged by 60.5 percent year-on-year to 5.9 million CGT while winning orders for 184 ships worth $18.4 billion.

Korea is the world’s second-largest shipbuilding nation after China.

“By CGT, Korean shipbuilders have won 36 percent of orders placed in the January to June period,” said Choi Gyu-jong, an official at the Ministry of Trade, Industry and Energy. “This seems to be a robust recovery given that Korean shipbuilders have succeeded despite various unfavorable market conditions, including a weaker Japanese yen. Clarkson’s statistics signal the possibility of the industry’s recovery.”

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If so, the rebound has been a long time coming. Some cash-strapped Korean shipbuilders - including STX Offshore and Shipbuilding, the world’s fourth-largest, and Sungdong Shipbuilding, the world’s eighth-largest - have sought debt-restructuring plans from creditors.

“Clarkson’s newbuilding price index, which measures the performance of global shipbuilding and marine industries, rose to 127 points last week, and this means ship prices began to move,” said Jeon Yong-beom, an analyst at I’M Investment and Securities. “The index remained unchanged from November 2012 to May. Container vessels are leading the rise in ship prices.”

The fact that shipbuilders in China are struggling to win new orders is also good news for Korean companies, market observers said.

Wang Jinlian, secretary general of the China Association of National Shipbuilding Industry, was quoted by Bloomberg this week as saying a third of the 1,600 Chinese shipyards could shut down within five years if the present “gloomy market persists.”

“Life for China’s shipyards will be tougher this year, as any form of credit crunch will be critical,” Sarah Wang, a Shanghai-based analyst at Masterlink Securities Corporation, told Bloomberg.

Conversely, Korea’s largest shipbuilders have been comparatively upbeat. The top 10 shipbuilders including Hyundai Heavy Industries, Daewoo Shipbuilding and Marine Engineering and Samsung Heavy Industries earlier this year set their combined goal for orders in 2013 at $58.8 billion, 9 percent higher than a year ago.

The Korea Institute for Industrial Economics and Trade forecast that the shipbuilding industry is likely to see a 4.8 percent growth in exports this year, compared to a 26 percent nosedive in 2012.

Meanwhile, Hyundai Heavy Industries, the world’s biggest shipbuilder, plans to raise its prices in the second half of this year due to increasing demand for fuel-efficient vessels, which should be a boost for profitability, analysts said.

“Recovery signs in the shipbuilding industry, including price increases, have emerged,” said Yoo Jae-hoon, an analyst at Woori Investment and Securities. “Shipbuilding will start to pick up exponentially in the second half of the year.”

BY KIM MI-JU [mijukim@joongang.co.kr]

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