Leading shipbuilders likely to face earnings shock in Q2

South Korean shipbuilders are forecast to report sluggish earnings in the second quarter of the year due to a sharp rise in prices of steel plates despite brisk orders, analysts said Sunday.

POSCO, South Korea's leading steelmaker, has raised the prices of steel plates for ships to 1.15 million won ($1,007) per ton, up nearly two times from a year ago, they said.

"A hike in prices of raw materials, including steel plates, will eat into leading shipbuilders' profits in the second quarter," said Chung Dong-ik, an analyst at KB Securities Co., in his recent report.

The cost of steel plates takes up about 20 percent of the overall expense of the ship construction.

The leading local shipbuilders-- Korea Shipbuilding & Offshore Engineering Co. (KSOE), Daewoo Shipbuilding & Marine Engineering Co. (DSME) and Samsung Heavy Industries Co. -- have bagged better-than-expected new orders in the January-June period.

KSOE, a holding company of Hyundai Heavy Industries Co., Hyundai Samho Heavy Industries Co and Hyundai Mipo Dockyard Co., surpassed its 2021 target order of $14.9 billion in the middle of this month, having won orders worth $15.2 billion in total so far this year.

Samsung Heavy Industries and DSME also achieved more than 60 percent of their annual order target in the first half of the year.

South Korean shipbuilders, including the above-cited three shipbuilders, saw their new orders rise over sevenfold in the first half of the year from a year ago, according to data provided by global market researcher Clarkson Research Service.

But the recent brisk new orders cannot contribute to shipbuilders' second-quarter earnings as it takes up to one year for a ship to be built. (Yonhap)