The announcement of the forthcoming merger between the two most major South Korean shipbuilders, Hyundai Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co., made headlines in 2019.
The developments would create two behemoths to control around 46% of the global market among the world’s top 10 yards, according data provided by VesselsValue Ltd, coming in continuation of a year-long downturn in global shipbuilding, as a result of a global slowdown in maritime trade.
It was said that the mergers between Chinese shipbuilders were putting the already struggling South Korean mid-size companies, into risk, as they could lose deals to construct oil tankers to Chinese companies, as it happened for bulk carriers.
What is new, Korea Shipbuilding & Offshore Engineering, an interim holding company of Hyundai Heavy Industries and its sibling shipyards, as of the end of November, met only 56% of its new order target for this year.
Daewoo Shipbuilding & Marine Engineering (DSME) managed to reach 69% and Samsung Heavy Industries managed to reach 91%.
It is further said that winning new orders in offshore plant plays a big impact on their business.
Samsung Heavy Industries was the only player in the list of massive deals for offshore plant this year, securing a 1.1 trillion ($960 million) deal to build a floating production and storage offloading (FPSO) unit from Indian energy giant Reliance Industries earlier in April.
The deal contributes to over 10% of the shipbuilder’s new order targets of $7.8 billion for this year.
Lee Dong-heon, a Daishin Securities analyst, quoted to Maeil Business Newspaper saying that if they close this year with no additional order, their business results will be negative.
Adding to this, it is said that as oil refiners are reluctant to place new orders due to high volatility of oil prices, it is increasingly difficult to get offshore plant orders.
What is more, Korean shipbuilders now face tougher competition as Japan is increasing its presence with advanced technology and China with its cheap labor costs.
No order in offshore plant construction will also lead to idle manpower and a wage burden; with the current situation, at least 1,000 offshore plant workers will likely have no work after the delivery of Tengiz oilfield in Kazakhstan is completed in July next year.
