South Korea’s three main shipyards struggle with sharp drop in new orders

South Korea’s three main shipbuilders are continuing to struggle for survival as the recession in the global shipbuilding market drags on, leading to an almost dearth of new orders so far this year for the Korean yards.

In the first quarter of this year, Daewoo Shipbuilding & Marine Engineering (DSME) and Samsung Heavy Industries (SHI) have received zero new shipbuilding orders, according to sources quoted by local media Yonhap. Hyundai Heavy Industries (HHI) is the only one among the three to have landed a KRW150bn ($130.6m) order in March to build two petrochemical tankers.

SHI, for instance, had clinched new orders worth $2.3bn in the first quarter of 2015, with the orders consisting of containerships, oil tanker and LNG carriers, compared to none received in the first three months of this year.

Demand for offshore units has been hit by the plunge in crude oil prices while the container shipping segment is awashed with capacity leading to reduced new orders as well. The Korean shipbuilders are mainly focused on constructing drillships, FPSOs, LNG carriers and large containerships.

The difficulties for the Korean yards are made worse by an equally weak conventional shipbuilding market, where they also face stiff competition from Chinese and Japanese yards.

The depressed state of the shipbuilding market has led to massive losses at the three Korean yards, with DSME posting a $2.88bn loss for 2015, HHI recording $1.13bn of loss and SHI reporting $1bn of loss, not to mention some 5,000 job cuts among them.

In view of the protracted downturn of the industry, the three Korean yards have trimmed their order targets for 2016 from 2015.

HHI, the largest among the three, is targeting to bring in $16.7bn worth of new orders, representing a 12.6% decrease from last year’s $19.1bn. SHI is eyeing a full year order worth $10bn compared to $15bn achieved in 2015 while DSME is aiming for $10bn, down from $13bn last year, the news report said.

Industry observers have expected the shipbuilding slump to persist this year due to the lingering overcapacity and slowing global economic growth. The stumbling shipbuilding sector is also feared to be a major drag on South Korea’s economy as the industry is one of the key growth engines, along with electronics and automobiles.



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