Korea’s shipbuilders are struggling to stay afloat

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Korea’s shipbuilders are struggling to stay afloat

Korean shipbuilders posted operating losses in the second quarter amid a slow recovery in demand for ships and a rise in material prices.

Hyundai Heavy Industries on Monday posted 175.7 billion won ($154.8 million) in operating losses during the second quarter. It is the third consecutive quarter that the shipbuilder has posted an operating loss. In the previous quarter, the company posted a loss of 123.8 billion won.

The company’s net losses amounted to 233.7 billion won in the April-June quarter. Its revenue fell by 26.4 percent to 3.1 trillion won.

The shipbuilder said in a statement that demand for ships is increasing and shipbuilding prices are bouncing back, but orders are still not enough and rising material costs like the price of steel are a heavy burden.

Hyundai also said some of its operating losses came from offering retirement benefits to employees that voluntarily left the company.

“We will continue to focus on expanding our customer base as we have secured various technologies to build eco-friendly ships through research and development,” a spokesperson for Hyundai Heavy said.

The shipbuilder, however, is still struggling with settling wage negotiations with its labor union. Its union went on strike from Thursday last week requesting a wage raise. The strike is expected to continue until today.

The company is maintaining that it cannot raise the base pay when it is posting operating losses and is asking labor unions to share the burden until the company’s business normalizes.

On Monday, Samsung Heavy Industries also posted operating losses in the second quarter.

According to its regulatory filing, the company posted 100.5 billion won in operating losses in the second quarter. Its revenue dropped by a whopping 41.4 percent year-on-year to 1.3 trillion won and net profit turned around to 142.7 billion won net losses.

The company said the loss was mainly due to a delay in delivery of a drill ship to Oceanian shipper Ocean Rig.

A spokesperson from Samsung Heavy said unexpected losses incurred from the postponed delivery of a drill ship and increasing materials costs could negatively affect annual operating profit as well.

Still, the company said it will try its best to fulfill its annual sales target.

It reported that it won orders for three special-purpose ships from a shipper from North America worth $370 million, though it did not reveal the name of the client or the type of ship at the customer’s request.

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