South Korea’s major shipyards, led by Daewoo Shipbuilding & Marine Engineering Co., suffered an estimated 7 trillion won (US$5.68 billion) in operating loss from their offshore facility business due to increased costs stemming from delayed construction and order cancellations, industry sources said Wednesday.
According to the sources, Daewoo Shipbuilding, Hyundai Heavy Industries Co. and Samsung Heavy Industries Co. are forecast to log a combined operating loss of 8 trillion won last year, about 7 trillion won of which came from their offshore facility businesses.
Hyundai Heavy racked up an operating loss of 1.54 trillion won last year, some 1.3 trillion won of which was from its offshore facility business, with the comparable figure for Samsung Heavy being 1.5 trillion won.
Daewoo Shipbuilding, which has yet to report its 2015 business results, posted an operating loss of 3.5 trillion won in its offshore facility business during the first three quarters of last year, with its full-year loss estimated at 4 trillion won.
The massive losses at their offshore facilities came as low oil prices sharply cut demand for offshore facilities such as oil drilling rigs, and customers canceled orders.
Also, a delay in the construction of offshore facilities led to a surge in costs, the sources said.
“Local shipyards cleared off massive losses last year, but it is too early to say that their offshore business will improve this year given oil prices at nadir,” said a source.
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. (Yonhap)