[OIL IMPACT] Builders, shipbuilders under pressure over sliding oil prices

[THE INVESTOR]South Korea’s construction companies and shipbuilders may face profit margin squeeze as overseas orders could further dry up due to a fresh oil price plunge.

On Aug. 2, crude dipped below psychological level of US$40 a barrel, fueling worries for the sectors, which have suffered from the prolonged industry slump stemming from last year’s oil price fall.

 

During the first half of this year, South Korean builders won overseas orders worth US$15.21 billion, down 40.1 percent from a year earlier due mainly to lower oil prices which prodded some Middle East countries to push back massive construction projects.

Samsung Engineering, the country’s major builder, hasn’t clinched a single order so far this year.

“The number of orders placed by Middle East companies has decreased because of low crude prices,” said Ra Jin-sung, an analyst at Kiwoom Securities.

Shipbuilders which logged massive operating losses last year amid a slowdown in the entire industry are also closely watching the movement in crude prices.

“It is very unlikely that the country’s major shipbuilders will win any deep sea drilling projects in the second half of the year due to the decline in crude oil prices,” said Kim Hyun, an analyst at Merits Securities.

By Park Han-na (hnpark@heraldcorp.com)