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S. Korean shipyards’ new orders come to nil in Jan.

February 1, 2016

SEOUL (Yonhap) — South Korean shipbuilders failed to secure any new orders in January, underscoring the protracted slump in the global shipbuilding segment, industry sources said Tuesday.

It marks a sharp turnaround from a year earlier, when the country’s big three shipyards — Hyundai Heavy Industries Co., Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co. — secured orders worth US$1.8 billion.

“January is usually an off-season for shipbuilders, but it is the first time that the major players have received no orders for the month,” a source said.

Lower oil prices have been leading to a drop in demand for new ships, such as offshore facilities, and Chinese rivals have scooped up a large slice of orders for smaller ships in particular.

In line with a protracted industrywide slump, the shipyards have trimmed their order targets for the year by 20 percent.

The three are expecting to win some $37 billion worth of new orders this year, compared with last year’s $47 billion, according to the sources.

Hyundai Heavy is targeting $16.7 billion worth of new orders this year, down 12.6 percent from last year’s $19.1 billion.

Daewoo Shipbuilding is aiming to win some $10 billion worth of new orders, compared with last year’s $13 billion. Samsung Heavy also cut its order target to $10 billion from last year’s $15 billion, the sources said.

Hit by a protracted slump in oil prices and increased costs, the shipbuilders are estimated to have racked up a combined operating loss of more than 8 trillion won ($6.1 billion) last year. If the figure hovers around that level, it will mark the first time for all of the nation’s three largest industry players to register operating losses.

Market watchers expect their business slump to continue this year as the global shipbuilding industry is unlikely to turn around any time soon.

The stuttering shipbuilding sector is feared to be a major drag on South Korea since it is one of the key growth engines for Asia’s fourth-largest economy, along with electronics and automobiles.