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South Korea Shipbuilders to Post First Export Drop in 19 Years

July 02, 2012

South Korea Shipbuilders to Post First Export Drop in 19 Years

A tanker is under construction at the Hyundai Heavy Industries Co. shipyard in Ulsan, South Korea. Photographer: Seokyong Lee/Bloomberg

South Korean shipbuilders, who account for about 10 percent of the nation’s exports, may post their first annual drop in overseas shipments in 19 years after a slump in orders during the global financial crisis.

Full-year exports of ships and offshore products may fall to $43 billion from a record $54.5 billion in 2011, the Ministry of Knowledge Economy said in an e-mailed reply to Bloomberg News questions yesterday. The value of first-half deliveries declined 20 percent to $25.5 billion, based on preliminary data, it said.

Hyundai Heavy Industries Co. (009540), the world’s largest shipyard, and other Korean shipbuilders are handing over fewer vessels this year after the credit crunch and falling freight rates caused orders to collapse from late 2008 into 2009. The yards, which take about three years to deliver vessels, are also focusing more on offshore equipment and larger ships that take longer to build, suggesting exports will rebound in 2013, said Um Kyung A, an analyst at Shinyoung Securities Co. in Seoul.

“The credit crisis pretty much wiped out orders in 2009 and that’s now starting to show,” she said. “It should get better next year when a lot of the offshore and big container- ship orders start to be delivered.”

The drop in ship and offshore project deliveries contributed to South Korean exports falling in four of the first six months of the year. The won has also dropped about 6.9 percent in the past year against the dollar, the third worst performance among 11 major Asian currencies tracked by Bloomberg.

Trade Balance

“Ship exports greatly affect South Korea’s total exports,” said Suh Jung Wook, head of research at Korea Development Bank, in Seoul. “The impact on the trade balance is also great, given that there’s very few components imported from overseas.”

Ships, offshore units and components were South Korea’s biggest export category last year with $54.5 billion of sales, based on Korea Customs Service data. Oil products were the second-largest segment at $59.6 billion.

Global ship orders plunged 69 percent from a year earlier in 2009 to 56.7 million deadweight tons, the least since the beginning of boom of 2002, according to Clarkson data. Of that total, South Korean yards won contracts for 19.2 million deadweight tons, 72 percent less than in 2008.

Hyundai Heavy, Samsung Heavy Industries Co. and Daewoo Shipbuilding (042660) & Marine Engineering Co., the world’s three biggest shipyards based in South Korea, all missed their order targets in 2009.

Hyundai Heavy fell 0.4 percent to 256,500 won in Seoul trading yesterday. The Ulsan, South Korea-based shipbuilder is little changed this year, compared with an 8.9 percent gain for Daewoo Shipbuilding and a 37 percent jump for Samsung Heavy.

LNG Facilities

Hyundai Heavy doesn’t have any major deliveries scheduled for this year. In 2013, it will hand over processing facilities totaling $2.06 billion for a Chevron Corp. (CVX:US) liquefied-natural-gas project in Australia.

Daewoo Shipbuilding also doesn’t have any significant deliveries pending this year. In 2013, it plans to hand over two 18,000-container ships to A.P. Moeller Maersk A/S. The vessels are among 20 ordered by the Copenhagen-based shipping line that will be the largest cargo-box ships afloat. It will also deliver a $1.8 billion floating oil production vessel to Total SA next year.

South Korean shipyards won orders for $11.7 billion of vessels in the first five months of the year, 50 percent less than a year earlier, according to Clarkson data. The tally, which excludes offshore equipment, was more than triple the $3.6 billion of orders won by yards in China, based on the data.

To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net


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