Korean shipbuilders awash in red ink

Samsung Heavy Industries won an order for three 155,000 dwt shuttle tankers back in June

JULY 29, 2015 — All three South Korean shipbuilding giants have now reported massive operating losses. After market close Wednesday, Samsung Heavy Industries reported an operating loss of 1.55 trillion won ($1.3 billion). Analysts had thought the loss would be 343 million won.

Daewoo Shipbuilding & Marine Engineering Co Ltd reported a provisional second-quarter operating loss of 3.03 trillion won ($2.62 billion), noting construction delays on offshore projects. Korean shipbuilders have looked to major offshore projects to offset their loss of market share of large merchant ships to lower price Chinese competition. So far, the strategy hasn’t worked that well for them.

Speculation has been mounting that Korea Development Bank (KDB) will sell off DSME. On July 22, KDB said that DSME’s overseas subsidiaries, Daewoo Mangalia shpyard in Romania and Irwin, TX, wind turbine business DaWind, must be liquidated.

Hyundai Heavy Industries Co Ltd reported a 171 billion won ($1.52 billion) operating loss during the same quarter.

“The slow recovery of shipbuilding and offshore industries is causing delays in seeing improvements,” a Hyundai Heavy official said, commenting that the impact of cost cutting and production process improvements will kick in during the second half of the year.