South Korean giant shipyard in danger

Even as the world's largest shipbuilding company, Hyundai Heavy Industries cannot escape its performance loss. Recently, it suffered a strike of 3,500 employees. How will this shipbuilding company resist pressure and avoid risks under multiple pressures such as dismal performance and strikes.

Since the release of the second quarterly report of the three major South Korean shipbuilding companies Hyundai Heavy Industries, Daewoo Shipbuilding and Samsung Heavy Industries, the three major South Korean shipbuilding companies have all launched a new ship, the Korea Shipbuilding Corporation. Among them, Hyundai Heavy Industries lost 0.62 trillion won; Daewoo Shipbuilding lost 3.03 trillion won; Samsung Heavy Industries lost 1.55 trillion won. In the second quarter, South Korea’s three major shipbuilding companies lost 5.2 trillion won in total, and this year may face a total of 2.5 trillion won in debt due. South Korea’s three major shipyards are facing huge losses, and almost all of them put the blame on the losses of the offshore business. However, industry insiders pointed out: "Shipbuilding costs are the main cause of shipbuilding costs or losses." Although the losses were heavy, the three major shipyards in South Korea did not. It is not as horrible as reported by some media, the number of orders is still abundant, and the major creditors are actively injecting capital to carry out rescue operations. Crisis is pervasive, and it does exist; machines also coexist.

Hyundai Heavy Industries is the world's largest shipbuilding company, and its shipbuilding business accounts for 15% of the world's share. Last year, Hyundai Heavy Industries won an order for 60 newbuildings worth US$6.192 billion. In July this year, Hyundai Heavy Industries received 39 new shipbuilding orders. Among these ships, 17 oil tankers, 15 container ships, 2 LNGC, 3 LPGC, and 2 other types of ships, totaling 4.268 billion U.S. dollars. It is expected that orders for new ships this year will reach 8.35 billion U.S. dollars.

Industry analysts believe that the cause of the general downturn in the Korean shipbuilding industry is related to cost. Many marine equipment ordering dates are being postponed due to the following reasons: falling oil prices have led to a significant drop in revenue; striving to minimize operational obstacles; striving to reduce costs. Based on the above considerations, offshore equipment contractors are considering measures including layoffs and delayed payment of construction costs. Some oil majors have postponed plans to deliver offshore equipment. Under normal circumstances, shipbuilding companies hand over 10% to 20% of the advance payment to the shipbuilding company. Once the offshore equipment manufacturer decides to delay the acceptance of the marine engineering order, it means that the shipbuilding company cannot receive most of the balance payment in time.

The construction of intelligent ships is another major technological innovation of Hyundai Heavy Industries after the establishment of the 3D printing shipbuilding technology center. Analysts pointed out that the main reason for the poor performance of Samsung Heavy Industries is the shipping business. When oil prices fell sharply, JPMorgan Chase issued a warning that shipbuilding companies should stay away from offshore engineering if they want to increase profitability. The current tanker market is in a prosperous period, and Samsung Heavy Industries may find profit opportunities in it. Paying attention to the construction of merchant ships and the rational use of its facilities can help Samsung Heavy Industries obtain higher profits than offshore engineering. However, Samsung Heavy Industries still needs a long time to solve the bottleneck problem in the development of the offshore industry.