Shipbuilders strike out in key market

South Korean shipbuilders failed to strike a single deal in selling offshore support vessels in the January-April period, a sign that they are at risk of losing the market to increasingly confident Chinese competitors.

Up to 22 of 34 offshore support vessels worldwide were sold by Chinese shipbuilders during the period, while local firms posted zero sales, according to industry reports.

China’s outpacing of local shipbuilders, including Daewoo Shipbuilding & Marine Engineering and Hyundai Heavy Industries, shows Korea’s lack of investment in the vessels, which transport equipment for offshore energy resource production, an industry source said. 

“South Korea has an outright lead in drilling technology and production facilities compared to Chinese shipbuilders. But the figures show that they have been focusing less on OSV investment, which led them to lose in the 10 trillion won ($9 billion) market,” he said.

STX Offshore & Shipbuilding had attempted to enter the market with STX OSV, but sold the affiliate to Italian state-controlled shipbuilder Fincantieri SpA in 2012.

Hyundai Heavy also vowed in 2013 to invest in OSVs, but the firm has shown no developments yet.

“We do not have good projections for the market. It is illogical to think the OSV market would be good when the shipbuilding industry on the whole is doing badly,” Hyundai Heavy spokesman Hong Jang-gwan said.

In the meantime, China’s OSV order book jumped nearly fivefold to 382 units between 2010 and 2014, accounting for about 53 percent of the global market, according to Shanghai-based Clarksons Research.

The exponential sales record deals a bigger blow to South Korean firms, as the OSV market is the only profitable industry amid slow demand in other shipbuilding sectors.

Recent oil price volatility has greatly reduced the demand for drill ships and floating production, storage and offloading units. But the demand for OSVs is steadily rising as they are also used for offshore plants that have been completed, according to reports.

Some industry watchers said the development is a tell-tale sign that other shipbuilding sectors will not remain immune to the competition.

In a separate development, South Korean shipbuilders clinched the largest amount of new orders in May, retaining the top spot for the fourth consecutive month, data showed Wednesday.

According to the data compiled by global researcher Clarkson Research Services, South Korean shipyards bagged new orders totaling 820,000 compensated gross tons last month.

Japanese rivals took orders worth 400,000 CGTs, followed by Chinese ones with 220,000 CGTs, the data showed.

South Korea has retained its status as the world’s leading shipbuilding country in terms of new orders since February.

In May alone, orders for 41 ships totaling 1.66 million CGTs were placed around the globe, down 36 vessels and 110,000 CGTs from the previous month, the data showed.

In the first five months of the year, South Korean shipbuilders secured new shipbuilding orders totaling 4.33 million CGTs, followed by Japan with 2.23 million CGTs and China with 1.95 million CGTs.

By Suk Gee-hyun and news report (monicasuk@heraldcorp.com)