South Korean shipbuilders' worst-ever slump may stretch into next year, as demand for new ships is expected to remain low amid still slackened oil prices and slumping global trade, prodding local shipyards to cut their output capacity, industry sources said Monday.
According to a report compiled by the Export-Import Bank of Korea (Korea Eximbank), a total of 2.32 million compensated gross tons (CGTs) worth of new shipbuilding orders were placed around the globe during the first quarter of the year, down 71 percent from a year earlier. By value, new ship orders also fell 63 percent on-year to reach US$6.51 billion.
Local shipyards' new orders plunged sharply with 170,000 CGTs worth of orders clinched by them in the January-March period, down 94.1 percent on-year. In terms of value, their orders also dropped 94 percent on-year to $390 million over the cited period, the report showed.
Consequently, South Korean shipyards accounted for 7.4 percent of new orders placed around the globe during the first quarter, compared with 30.2 percent a year earlier.
"Overall demand for new ships is weak and all kinds of shipbuilding orders seem to be abnormal," the report said.
The report said local shipyards constructed 3.43 million CGTs worth of ships in the January-March period, up 2.6 percent from a year earlier.
But as of end-April, their order backlog totaled 27.59 million CGTs, down 16.2 percent from a year earlier and 11.1 percent from the end of last year, it said. "Given various conditions, the order backlog is estimated to keep them busy for less than 2 years," it said.
The report said South Korean shipbuilders are expected to clinch new orders worth 1.6 million CGTs this year, down 85 percent from a year earlier. By value, their new orders are forecast to reach $3.5 billion this year, compared with last year's $23.67 billion.
With the cut in new orders, their order backlog is likely to drop 34 percent this year, it forecast.
"Their business slump may continue throughout this year, and demand for oil tankers may improve slightly during the second half of the year," it said.
Local shipyards, meanwhile, are moving to cut their output capacity by shutting down docks.
Last week, Hyundai Heavy Industries Co. said it plans to close part of its shipbuilding docks as it failed to secure new orders.
The cash-strapped Hyundai Heavy is reportedly moving to sell a supertanker valued at about 150 billion won by auction in China later this year, in a separate effort to tide over its liquidity crisis.
Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co. are expected to follow suit.
Last week, Jung Sung-leep, president of Daewoo Shipbuilding, said the company will submit an additional set of measures to its creditors later this month, including a cut in wages and workforce.
Samsung Heavy is also expected to submit its self-rescue plan to its creditors later this month.
The shipbuilding industry, once regarded as the backbone of the country's economic growth and job creation, has been reeling from mounting losses caused by an industrywide slump and increased costs.
The big three shipyards racked up a combined net loss of 7.7 trillion won last year, marking the first time that all three of the nation's largest industry players registered losses.