Korean shipbuilders to hike newbuilding prices; Daewoo eyes $1 bn deal

South Korea’s major shipbuilding companies are set to benefit from rising newbuilding prices, brightening the outlook for an improvement in their profitability this year.

The country’s shipbuilders led the industry with decent new orders in 2020, but their profitability has worsened as they focused on quantity to maintain their global leadership.

Most domestic shipbuilders posted losses last year accordingly, but the situation is changing with rising newbuilding prices, an indicator of the shipbuilding industry’s business outlook, alongside increased new orders.

According to the shipbuilding industry on Feb. 5, Daewoo Shipbuilding & Marine Engineering Co. is close to signing a deal with Royal Dutch Shell, a Netherlands-based energy firm, to build 10 very large crude carriers, worth 1.1 trillion won ($978 million) this month. Daewoo started the year with an order to build two liquefied petroleum gas (LPG) carriers for a Norwegian company in January.

Data from global market researcher Clarkson Research Service showed the Clarkson Newbuilding Price Index rose to 127 last week from 126 at the end of 2020.

Newbuilding prices, which had been on an uptrend since 2016, significantly fell last year due to the fallout of the COVID-19 pandemic, and are staging a rebound on the back of rising new orders.

The local shipbuilding industry expects newbuilding prices to rise throughout the first half of this year, given the rising prices of second-hand vessels, whose price index advanced to 99 last week, up three points from two weeks earlier.

KOREAN SHIPBUILDERS SET TO RAISE NEWBUILDING PRICES

Korea Shipbuilding & Offshore Engineering Co. (KSOE), the intermediate holding company of Hyundai Heavy Industries Group, is widely expected to raise its shipbuilding prices in the near future to reflect rising orders.

"We plan to raise shipbuilding prices starting with containerships, which are in greater demand with an economic recovery. We're thinking of pretty significant price hikes," said a Hyundai Heavy official.

The planned price increases come as Korean shipbuilders are continuing their order winning streak, which began in late 2020.

On Wednesday, KSOE said it has won orders worth a combined $230 million from Africa and Europe to build five vessels -- two liquefied petroleum gas (LPG) carriers and three petrochemical product carriers.

The vessels will be built by KSOE’s subsidiary, Hyundai Mipo Dockyard Co. KSOE has three shipbuilding affiliates -- Hyundai Heavy Industries Co., Hyundai Samho Heavy Industries Co. and Hyundai Mipo Dockyard.

Hyundai Heavy Industries Group has won shipbuilding orders for a total of 17 ships worth 1.7 trillion won so far this year.

Samsung Heavy Industries Co. clinched a deal to build a liquefied natural gas (LNG) carrier worth 450 billion won in January.

Write to Man-Su Choe at bebop@hankyung.com
In-Soo Nam edited this article.