South Korean shipbuilders are feeling the pinch of falling demand this year amid a prolonged global slump stemming from low oil prices and tougher competition with Chinese rivals, industry officials said Monday.
The nation’s big three shipyards — Hyundai Heavy Industries Co., Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co. — failed to clinch any new orders in January, with Hyundai Heavy bagging three contracts worth of $300 million this month.
“Although January and February are considered the off-season, the recent situation is much worse than in the past,” an industry official said. “The amount of Hyundai Heavy’s orders is not notable; it is nearly zero.”
Lower oil prices have been leading to a drop in demand for new ships, such as offshore facilities, and Chinese rivals have scooped up a large slice of orders for smaller ships in particular.
In the face of a protracted industrywide slump, the shipyards have trimmed their order targets for the year by 20 percent.
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.
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.