Amid dwindling orders and tough competition, South Korean shipbuilders have called on steelmakers to keep the prices of shipbuilding plates at current levels, until their businesses are ‘back on track’.
In an official statement issued on Monday, the Korea Offshore & Shipbuilding Association demanded that steel firms freeze the prices of thick steel plates as any price increase will threaten their survival, according to Yonhap news agency.
This comes as the domestic shipbuilding industry is hit by a decrease in new orders and an oversupply of vessels in the last decade, as a result from global economic downturn in 2008 and Chinese competition.
Shipbuilders face a double blow of declining sales and deteriorating profitability. As shipyards cannot pass most of the rising raw material prices onto clients, they are expected to have their worst annual performance in history, the statement read.
In the first half of the year, thick steel plate prices rose 50,000 won (US$44) per ton. Another 50,000 won increase a ton in the second half would cost shipbuilders an additional 300 billion won in manufacturing costs, the Association explained.
South Korea hosts the world’s three largest shipbuilders by sales: Hyundai Heavy Industries Co., Samsung Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co. The companies have announced several measures in the last year to encounter financial crisis.
In early July, Hyundai Heavy, the world’s largest shipbuilder, announced that it has cut its workforce in the offshore sector by one third. Meanwhile, about 4,000 employees have left the company under voluntary retirement programs in 2015-2017.
Samsung Heavy has also announced earlier this year that it would cut the number of its executives, due to declining orders.
