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Korean shipbuilding stocks gain momentum on bright earnings prospect

South Korea’s shipbuilding stocks are rising on the back of expectations that their profitability will improve over the next three years as their portfolio of high-value ships expands.

Shares of Daewoo Shipbuilding & Marine Engineering Co. (DSME), which is set to be renamed Hanwha OCEAN on Tuesday following the acquisition by Hanwha Group, rose 11.75 percent on Monday from the previous session.

Other shipbuilding stocks gained ground.

HD Hyundai Heavy Industries Holdings Co. climbed 5.49 percent, Samsung Heavy Industries Co. 4.58 percent, and Hyundai Mipo Dockyard Co. 9.7 percent.

The gain is being led by rising shipbuilding prices despite falling new orders won by shipbuilders.

The prices of building new ships have hit a record this year to reach a level in 2009 when the country’s shipbuilding industry was in its heyday.

According to Clarkson Research, the New Building Price Index, which measures the average price of building new ships, reached 168.1 as of May 12, up 3.4 percent from 162.51 in January.

The index has gone up above the 160 range since May, a level reported in 2009 when Korean shipbuilders enjoyed the highest-ever revenue by raking in orders at low prices.

In particular, the price of liquefied natural gas (LNG) carriers, the mainstay of local shipbuilders, has been on the rise at a rapid pace.

According to NH Investment & Securities Co., the average price of an LNG carrier is estimated at 340.1 billion won ($258 million) per vessel, up 32 percent from 2021, when ship prices began to rise.

Source: Pulse

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