TMCnet News
S. KOREAN SHIPYARDS LAUNCH NEW BUSINESSES AS ORDERS SHRINKSEOUL, Mar 16, 2009 (AsiaPulse via COMTEX) -- South Korean shipbuilders are seeking to diversify their business portfolios as declining orders stemming from the global economic recession are threatening to eat into their earnings, industry sources said Sunday. Orders to South Korean shipyards have surged over the past few years, but demand for new vessels has dropped sharply since the third quarter of this year as worldwide financial turmoil erodes sales of commodities and consumer goods. In the first two months of the year, only Samsung Heavy Industries Co. KSE:009540), the world's second-largest shipbuilder, has won a single shipbuilding order valued at US$680 million. To compound their woes, shipping lines worldwide reportedly are demanding that orders be canceled and delivery of new ships be delayed. "It is worrisome that major shipbuilders have not won orders so far this year," said Lee Jae-won, an analyst at Tong Yang Investment Banking Corp. "Although they have massive order backlogs, the declining trend of new orders is expected to hurt the industry to some degree. Local shipyards have order backlogs stretching ahead three years. But the global financial crisis has made it difficult for shipowners to finance new vessels or even pay for the ones ordered, causing a five year run of record orders to shudder to a halt at the South Korean shipyards. Given this backdrop, the country's shipyards, led by Hyundai Heavy Industries Co. (KSE:009540), are turning their eyes to new businesses. Shipbuilding-related sales at Hyundai Heavy, the world's leading shipbuilder, account for around 50 percent of its total sales with the remainder coming from engines, machinery and construction equipment. But the company wants to reduce its heavy reliance on shipbuilding and other related businesses by venturing into other sectors. Hyundai Heavy, the country's leading shipyard, has recently started working on a 100-billion won ($67 million) project to build a plant that makes wind power generators. The company is already involved in a solar energy business project. In 2006, the company exported $60 million worth of solar cell-related equipment to Spain. It expects its sales of solar cells and solar modules to reach one trillion won in 2010 on rising demand for alternative energy. "Like Hyundai Heavy, local shipbuilders are seeking to diversify their business lines, which will help offset slugging shipbuilding business," said Lee. Samsung Heavy Industries Co., the world's second-largest shipyard, has followed suit. It announced plans late last year to develop offshore wind power-generating facilities with a capacity of up to 5 megawatts. The shipbuilder also is considering launching a desalination facility-related business. Daewoo Shipbuilding & Marine Engineering Co. (KSE:042660), the world's No. 3 shipbuilder, is also actively engaged in a construction project. The shipbuilder recently signed a memorandum of understanding with the government of Oman to develop an industrial area there. If finalized, the estimated at 15 trillion won deal will be the biggest overseas contract ever won by a South Korean firm. Daewoo Shipbuilding has also established a joint venture shipping company with the Nigerian National Petroleum Co. to carry crude oil. (Yonhap) |