Samsung Heavy Industries (SHI), one of Korea’s top three shipyards, has not received any orders for nearly a year since last October, hinting that the nation’s shipbuilding industry may not make a turn for the better any time soon.
An SHI-led consortium with India’s state-owned Cochin Shipyard is negotiating with India’s state-run Gas Authority of India Limited (GAIL) since April to build nine LNG carriers, but a deal has yet to be concluded. It also has similar ongoing negotiations with a Chinese firm, but needs to come up with results.
An official said, however, that another SHI-led consortium seeking a role in a project to develop an offshore gas field near Mozambique could bring about a change. Italy’s state-run energy company ENI placed an order for a floating liquefied natural gas (FLNG) terminal worth about $5.4 billion, under which SHI is expected to build half the facility. The consortium also involves France’s Technip and Japan’s JGC.
“The order will give a new opportunity to SHI if we manage to clinch the deal. The ENI’s FLNG project accounts for nearly half of the company’s target revenue of $5.3 billion for this year,” he said.
“And if we are also able to succeed in the remaining negotiations, including the GAIL project, SHI can achieve this year’s target.”
The country’s other two major shipyards ― Hyundai Heavy Industries (HHI) and Daewoo Shipbuilding & Marine Engineering (DSME) ― haven’t achieved half of their targets so far.
HHI and its affiliate Hyundai Samho Heavy Industries have jointly clinched orders worth only $2.2 billion, 13.17 percent of their target of $16.7 billion this year.
HHI is not expected to clinch another deal except for its ongoing negotiations with Russia’s state-owned shipper Sovcomflot to build 12 oil tankers. However, the project is only worth $660 million, not nearly enough to reach its target.
Due to the “order cliff,” HHI shut down operations at its rig building shipyard in Onsan, which produces a wide range of offshore facilities, in January. Also, it recently stopped operating its bulk-building dock.
Meanwhile, DSME has so far achieved only $1 billion worth of shipbuilding orders among its goal of $6.2 billion this year.
DSME executives have recently lowered the company’s goal to $3.5 billion, and decided to carry out a “contingency plan” to salvage the company. The plan reportedly includes payroll deductions, additional layoffs and the sale of facilities to secure liquidity worth 2 trillion won ($1.78 billion).
“SHI and DSME separately aimed to receive more than $10 billion worth of orders at the beginning of this year, but had to lower their targets while submitting self-rescue plans to creditors,” an industry insider said.
“If they fail to achieve their goals for this year, they will have no choice but to carry out massive layoffs and be forced to sell facilities next year.”
According to U.K.-based shipping and offshore gas industries analyst Clarkson Research, the total market orders in shipbuilding marked the equivalent of 7.99 million compensated gross tons (CGT) in the January-August period this year, one third of last year’s figure of 25.01 million CGT.
Of this, Chinese shipbuilders have clinched 3.06 million CGT, or 38.3 percent, while Korean shipyards have won 1.07 million and Japanese shipyards, 970,000 during the period.
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