Hyundai Heavy seeks momentum on stronger emission rules

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Korea Shipbuilding & Offshore Engineering (KSOE) is expecting to gain momentum in its recovery this year as strengthened emission regulations will force shippers to replace their old vessels, the shipbuilding firm said in a conference call. The KSOE is an intermediate holding firm controlling Hyundai Heavy Industries and two other Hyundai Heavy Industries Group shipbuilders.

“The demand for replacing old vessels is expected to grow quickly following the International Maritime Organization’s strengthened nitrogen oxide (NOx) emission rules which took effect on Jan. 1,” Hyundai Heavy Industries Senior Vice President Kang Jae-ho said during the call.

“Based on this, we expect a positive impact on the shipbuilding market, though there are uncertainties over the U.S.-China trade conflicts, disputes in Middle East and the spread of a new coronavirus.”

The International Maritime Organization (IMO) has set a limit for sulfur in fuel oil used on board ships of 0.5 percent mass by mass from Jan. 1, down from 3.5 percent, previously. This has triggered shippers to replace their old vessels to abide by the regulations and refiners to develop low sulfur fuel products.

Reflecting the enhanced regulation, Clarksons research expected the global shipbuilding order will reach 38.5 million compensated gross tonnage (CGT) this year, up from 25.29 million CGT last year.

“Though the building price remains at an unsatisfactory level, the increase in orders will push up the overall profitability,” Kang said.

According to the KSOE, a growing number of shippers are making inquiries over eco-friendly container and tanker vessels, while LPG carriers are showing solid orders from India, China and the U.S.

Of the various vessels the company’s units are building, KSOE said it is expecting “a strong order” in LNG carriers, which spearheaded KSOE’s sales growth last year.

“In the fourth quarter of last year, LNG carriers’ shares to Hyundai Heavy Industries’ total sales grew to 49.2 percent,” the company said in the call. “With Hyundai Samho Heavy Industries also having a 41 percent share, we believe LNG carriers’ shares will hover over 40 percent throughout this year.”

Kang said the U.S., Russia, Australia and Middle East nations are showing sharp increases in their LNG output while demand from Asian countries is soaring. Along with ongoing key LNG projects in Qatar and Russia, such a momentum will continue to buoy KSOE units’ profitability.

“As environmental concerns grow, the IMO plans to introduce stronger emission regulations in 2030 and 2050, and KSOE is gearing up its efforts to develop new technologies that can cut nitrogen oxide and other emissions,” Kang said.

The KSOE posted 15.18 trillion won in sales last year, up 15.4 percent from a year earlier, and swung to an operating profit of 290.2 billion won. In the fourth quarter, it posted 4.34 trillion won in sales, up 16.8 percent year-on-year, and also turned to an operating profit of 169.9 billion won.

Of KSOE companies, Hyundai Heavy Industry recorded 5.46 trillion won in sales and 129.5 billion won in operating profit.

Over KSOE’s ongoing bid to bring Daewoo Shipbuilding & Marine Engineering under its umbrella, the company said the decision from the competition authority of the European Union will be decisive, but refused to elaborate further.

Source: Korea Times

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