Top 3 Korean shipyards post massive losses due to offshore downturn

South Korea’s top three shipbuilders Hyundai Heavy Industries (HHI), Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering (DSME) have posted operating losses of a combined KRW 4.8tr ($4.15bn) for the second quarter 2015, largely due to a downturn in the offshore shipping market.

Korean yards shifted their focus to manufacturing offshore vessels when oil was still trading at over $100 per barrel and Chinese yards outcompeted them for bulker and tanker orders – but the falling oil price, production delays and cancellations have inhibited the yards’ profitability, which Splash looked at in this recent analysis.

Of the three yards, DSME posted the largest operating loss of KRW 3.07tr ($2.65bn) during the quarter, much more than the KRW 2.0tr that had been estimated.

“The losses expanded more due to unforeseen costs that arose from contracts to build specialized vessels that we had no previous experience in. Such projects include the Songa Rig, a semi-submerged drilling ship,” DSME said in a statement today.

Samsung Heavy Industries posted an operating loss of KRW 1.55tr ($1.34bn) in the second quarter, down 592% on the operating income of KRW 262bn posted in the same quarter last year.

HHI fared the best of the three, posting an operating loss of KRW 171bn ($147.6bn), which it attributed to the slow recovery of the shipbuilding industry and the offshore shipping market.

The yard told press it expects its bottom line to reflect its cost-cutting measures and improvements to production efficiency by the end of the year.

Holly Birkett

Holly is Splash's Online Editor and correspondent for the UK and Mediterranean. She has been a maritime journalist since 2010, and has written for and edited several trade publications. She is currently studying for membership of the Institute of Chartered Shipbrokers. In 2013, Holly won the Seahorse Club's Social Media Journalist of the Year award. She is currently based in London.
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