South Korean shipbuilders are likely to win more tanker orders as cash-rich tanker operators are willing to invest in new vessels, said an analyst.
Hana Daetoo Securities analyst Park Moo-hyun said in a research report that tanker operators have been making money from ships ordered in 2012 because of the low newbuilding price then.
However, after 2015 tanker freight rates have been in positive territory due to increasing demand for floating storage and growing oil trade, a result of the oil shock.
Park explained, “Tanker companies are making money from operating vessels with the current increasing freight rates. Given this situation, tanker companies will invest in new ships rather than operating secondhand vessels.”
Year to date, tankers account for more than 50% of orders that Korean shipbuilders have won.
Of the Korean shipbuilders, Hyundai Heavy Industries (HHI) and its subsidiaries show the largest increase in tanker orders.
As of 2015, HHI and Hyundai Samho Heavy Industries (HSHI) won orders for 10 and 11 tankers, respectively. Meanwhile, Daewoo Shipbuilding & Marine Engineering won orders for six LNG carriers and six tankers from January to April. Park predicted that HHI and its subsidiaries would win more tanker orders.
STX Offshore & Shipbuilding and Sungdong Shipbuilding & Marine Engineering have been clinching orders for LR products tankers while Hyundai Mipo Dockyard is expected to win more orders for MR tankers.
Park opined, “Falling oil prices will cause demand for oil storage increase at the initial stage. Then, excessive oil production will boost demand for refined oil in the end.
“Historically, dirty tankers and clean tankers have shown the same movements in terms of freight rates and new orders.”