South Korean shipyards, led by Hyundai Heavy Industries Co., have trimmed their order targets for the year by 20 percent as a slump in oil prices is widely expected to continue, sapping demand for offshore facilities, industry sources said Tuesday.
Hyundai Heavy, Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co. are expecting to win some $37 billion worth of new orders this year, compared with last year’s $47 billion, according to the sources.
Hyundai Heavy is targeting $16.7 billion worth of new orders this year, down 12.6 percent from last year’s $19.1 billion.
Daewoo Shipbuilding is aiming to win some $10 billion worth of new orders, compared with last year’s $13 billion. Samsung Heavy also cut its order target to $10 billion from last year’s $15 billion, the sources said.
Hit by a protracted slump in oil prices and increased costs, the shipbuilders are estimated to have racked up a combined operating loss of more than 8 trillion won ($6.1 billion) last year. If the figure hovers around that level, it will mark the first time for all of the nation’s three largest industry players to register operating losses.
Daewoo Shipbuilding’s 2015 operating losses are estimated at about 5 trillion won, with corresponding figures for Hyundai Heavy and Samsung Heavy reaching 1.5 trillion won and 1.7 trillion won, respectively.
In 2014, their combined operating losses hovered above 2 trillion won.
Market watchers expect their business slump to continue this year as the global shipbuilding industry is unlikely to turn around any time soon.
The stuttering shipbuilding sector is feared to be a major drag on South Korea since it is one of the key growth engines for Asia’s fourth-largest economy, along with electronics and automobiles.