The huge offshore gamble that South Korea’s big three shipbuilders embarked upon around a decade ago has come back to haunt them, with plenty of cancellations leading to red ink thanks to the low oil price environment. The trio – Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering – have just notched up their worst-ever combined operating loss in the third quarter this year: more than KRW7trn ($6.15bn).
What’s more worrying is the fragility of their forward orderbook, something that will also have ramifications for the shipping industry too. The three yards have 70 offshore plant projects worth $66.2bn on their combined orderbook. With cancellations accelerating, the yards are opening up slots to VLCCs, VLGCs, suezmaxes and aframaxes to fill suddenly vacated slots which could hit the tanker trades.
Restructuring among the big three yards is likely to see as many as 10,000 employees laid off in the coming two to three years
“Companies that cannot float on their own need to be ousted, which can help alleviate market uncertainties,” said Financial Services Commission chairman Yim Jong-yong. “Restructuring can eventually help the national economy.”