Prolonged slump bodes ill for Korean shipyards in Q3

An extended slump is expected to undermine South Korean shipbuilders' earnings in the third quarter of the year amid the COVID-19 pandemic, with a meaningful recovery in the near future not in sight.

According to the data provided by global market researcher Clarkson Research Service, global new orders for ships more than halved to 8.12 million compensated gross tons (CGTs) in the first eight months of the year from 17.47 million tons a year earlier.

"South Korean shipbuilders may log another round of poor performances in the third quarter due to a decrease in ship prices caused by faltering orders for ships," Yoo Seung-woo, an analyst at SK Securities Co., said in his recent report.

He also said Korean shipbuilders' earnings in the fourth quarter may not improve because it is unclear whether a preliminary deal to build about 100 liquefied natural gas (LNG) carriers from Qatar will materialize.

There have been hopes that the deal in June clinched by Korean shipyards such as Korea Shipbuilding & Offshore Engineering Co. may help improve their bottom lines down the road if the preliminary deal leads to actual orders.

But some analysts said local shipyards may win more deals during the remainder of the year.

Kim Hong-gyun at DB Financial Investment said local shipbuilders would win orders for LNG carriers in the fourth quarter from Mozambique and Russia to carry LNG to be produced in the countries' gas fields.

In addition, a slight rise in oil prices would be a bright spot for South Korea's large-sized shipbuilders, as delayed orders for offshore plants might be placed in Australia, Nigeria and Canada, Kim added.

Offshore plants refer to large-scale floating facilities to explore, drill, extract, store and process crude and natural gas that lies deep under the seabed.  (Yonhap)