South Korea’s Big Three shipbuilders are not likely to return to the black until 2017 at the earliest, according to an industry analyst.
The double blow of overcapacity in shipbuilding and the collapse in oil prices are blamed.
In a report, NH Investment Securities analyst Yoo Jae-Hoon argues that demand for offshore plants will decline in tandem with oil prices.
While new environmental regulations will encourage shipowners to build eco-ships, this is insufficient to effect a quick turnaround for the likes of Hyundai HI, Samsung HI, and Daewoo Shipbuilding & Marine Engineering (DSME), he said. “Although there have been intermittent orders for fuel-efficient ultra-large container ships and LNG carriers, capacity is limited at the shipbuilders.”
While Samsung HI is still busy building Shell’s Prelude FLNG vessel and two offshore platforms for Statoil, such orders have since dried up.
IHS Maritime Sea-Web data shows the builder has 112 ships in its orderbook, 37 of which were ordered this year. Apart from the Statoil platforms and three tentative FLNG hulls for the Browse project, the other orders are for large container ships and tankers.
DSME has not won any orders for offshore units this year; its only new contracts have been for LNG carriers and oil tankers.
The outlook for drillships is definitely not bright, according to Yoo. This is largely due to speculative drillship orders from 2011-2013 that has resulted in a glut of such vessels. The utilisation rate of drillships has fallen from 91% last year to 72% at present.
Yoo believes Hyundai HI could achieve a turnaround in financial fortunes by 2017 as its orderbook has a healthy mix of commercial ships and offshore vessels.
Sea-Web data shows it has 136 ships on order and many of these are LPG carriers and oil tankers.
Samsung HI and DSME could take longer to restore profitability as their orderbook is skewed towards offshore vessels and floating production systems.
DSME, while having the biggest orderbook for LNG carriers, is carrying a burden of lossmaking offshore plants. Those losses run to about KRW3 trillion (USD2.5 billion). The company is selling non-core businesses and restructuring its workforce to boost liquidity.
This post was sourced from IHS Maritime 360: View the original article here.