Korean shipbuilders regain top post, to profit from higher ship prices

South Korea’s three major shipbuilders have regained the world’s No. 1 title in terms of ship orders and are expected to swing to profit next year following two years of losses due to rising shipbuilding prices.

According to market researcher Clarkson Research Service, the “Big Three,” – Korea Shipbuilding & Offshore Engineering Co. (KSOE), Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co. – clinched 1.32 million compensated gross tons (CGTs) in new orders for 22 vessels in September, accounting for 61% of 2.17 million CGTs for 56 ships ordered globally.

Chinese shipyards came in second with a combined 550,000 CGTs or 27 ships.

CGT measures the amount of work required to construct ships.

In the first nine months of the year, Korean shipbuilders won 13.22 million CGTs for 239 ships, close to China’s 13.27 million CGTs for 524 vessels.

Korean companies are increasingly seeking orders for more expensive ships such as LNG carriers. In the relatively low-priced tanker and container ship market, Korean shipbuilders fiercely compete with Chinese rivals, which usually offer lower pricing.

LIGHT AT END OF THE TUNNEL

Data showed that Korean shipbuilders’ order backlogs are also strong with a steady stream of new orders.

The Big Three’s combined order backlog stood at 36.06 million CGTs at the end of September, up 20.5% from the end of 2021.

Last week, KSOE, the intermediate shipbuilding holding company of the Hyundai Heavy Industries Group, said it won a combined 2.1 trillion won ($1.5 billion) deal to build six methanol-powered containerships for Denmark’s A.P. Moller-Maersk and an LNG floating storage and regasification unit (LNG-FSRU) for US-based Excelerate Energy Inc.

With the latest contracts, KSOE has won orders for 183 ships worth $21.82 billion year to date, exceeding its full-year target of $17.44 billion.

With growing post-pandemic cargo traffic across the world, new shipbuilding prices are also on an uptrend.

The Clarkson Newbuilding Price Index rose to a 13-year high of 162.27 at the end of September, up 13.15 points from a year earlier.

Newbuilding prices, a barometer of price changes in newly built ships, have been rising since December 2020.

Prices of LNG carriers, a segment where Korean shipyards have a technological edge over rivals, rose to an average of $244 million per vessel in September, up by $4 million from the previous month.

The price of a very large oil tanker hovered around $120 million last month, while a very large container ship was priced at around $215 million, up by $1 million from August, according to industry officials.

ROSY EARNINGS PROSPECTS

Rising new shipbuilding prices and a growing list of orders are expected to boost the three Korean shipbuilders’ earnings for next year.

According to financial data provider FnGuide, the market consensus for KSOE’s 2023 operating profit is 942.5 billion won. The company, which posted an operating loss in 2021, is widely forecast to report another loss this year.

The other two Korean shipyards are also expected to swing to profit next year.

Samsung Heavy is projected to post 139.5 billion won in operating profit in 2023, while Daewoo Shipbuilding will likely report a profit of 202.5 billion, according to FnGuide.

In August, the Korean Big Three slipped to second place in terms of new orders, yielding their top ranking to Chinese rivals, as they were shifting toward high-value vessels such as LNG carriers.

Write to Ik-Hwan Kim at lovepen@hankyung.com
In-Soo Nam edited this article.