Korean shipbuilders may gain upper hand in contract talks with shippers

Hyundai Heavy Industries Co. and other South Korean shipbuilders are expected to hold all the aces in their negotiations with shippers thanks to abundant order backlogs, an industry expert said Friday.

“South Korean shipbuilders secured order backlogs of 28.56 million compensated gross tons (CGTs), accounting for 2 1/2 years’ worth of work as of early October, helped by strong new orders in the January-September period,” Yang Jong-seo, a researcher at the Korea Eximbank Overseas Economic Research Institute, said in his recent report.

“The abundant order backlogs will help local shipbuilders gain the upper hand in bargaining with shippers and push the prices of ships by reflecting a rise in prices of steel plates,” he said.

Yang also said 20-millimeter steel plates produced locally were traded at 1.22 million won (US$1,036) per ton on average in September, up 96.4 percent from the end of 2020.

The cumulative new orders of South Korean shipbuilders in the first nine months reached 14.57 million CGTs, up more than fourfold from the same period a year ago, the report said.

Of the total new orders won by local shipbuilders in the first three quarters of the year, 40.5 percent are container carriers, followed by LNG carriers with 27.4 percent, oil tankers with 11.5 percent and LPG carriers with 10.5 percent.

Clarkson’s Newbuilding Price Index, indicating price changes in newly built ships, rose to an average of 149.1 in the third quarter, up 7.4 percent from the end of the previous quarter, the report added.

The report predicted local shipbuilders to bag new orders of a total of 17 million CGTs in 2021, nearly doubling from a year ago.