Posted by: Ihlwan Moon on April 2, 2008
If the first quarter performance is an indicator for a longer-term business climate, South Korea’s white-hot shipbuilding industry is poised to bask in glory. Despite forecasts by industry analysts that shipbuilding orders will fall sharply this year, there’s no sign yet that things are cooling off.
Consider Korea’s Hyundai Heavy Industries, the world’s largest shipbuilder. In the first three months of this year, it won new orders for 40 ships worth some $6 billion. That’s a sharp increase from the same period of last year, when the company secured contracts for 25 ships worth $2.5 billion. “We are going to have another bumper year in 2008,” Hyundai Heavy spokesman Lee Kwang Ho says, adding that his company recently revised upward its new order target this year to $17.1 billion from an earlier $14.5 billion.
One reason, according to industry watchers, is that Chinese yards have not lived up to expectations recently. Analyst Cho Young Jun, who follows the industry for Shin Young Securities in Seoul, figures global shipbuilding orders have dropped by as much as 30% this year but the failure by the Chinese to deliver ships on time is prompting ship owners to place orders with the Koreans instead. Korea, home for the world’s top three shipyards, has secured some 60% of all global ship orders so far this year, he said.
The Chinese remain potential threats. Armed with cheaper labor, Chinese yards last year snatched contracts for bulk carriers and smaller tankers. Yet Korean execs in the industry say a big gap in productivity, quality control, and punctual delivery will keep the Chinese away from big-buck projects in the foreseeable future. The current boom won’t last forever in the notoriously cyclical shipbuilding industry, but as long as the Chinese stumble, the good life at the Korean yards will likely continue for the time being.