Korea’s big three yards brace for more hits to their $66bn offshore backlog

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.”

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.
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