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SEOUL – Things are looking up for South Korean shipbuilders after a protracted crisis, as new orders pour in and global trade is boosted by consumer demand driven by government stimulus measures during the coronavirus.
From the early 1970s and led by Hyundai Heavy Industries, South Korea overtook its Japanese rivals and dominated the global industry for decades. But in recent years, China has taken advantage of falling costs to seize the role of the world’s largest shipbuilding nation.
South Korean shipbuilders, however, maintain a reputation for quality and technical innovation and hope the six-day blockade of the Suez Canal will boost orders as it shows the importance of avoiding accidents at key points. strangulation of world trade.
Samsung Heavy Industries shares jumped 3.45% on Monday, after rising 6% on Friday after it said it won a 2.8 trillion won ($ 2.5 billion) order for 20 container ships in what Daishin Securities declared to be the largest single transaction in history. of the merchant shipbuilding industry.
Hyundai Heavy Industries said the same day that Korea Shipbuilding & Offshore Engineering, Hyundai Heavy’s shipbuilding holding company, had signed a 673 billion won contract to build five mega container ships for Taiwanese company Wan Hai Lines. . KSOE rose 1.52% on Monday, after climbing 11.39% on Friday.
“We are getting many calls for a wide range of vessels, including container ships, as freight demand increases and freight rate expectations are high,” said a KSOE official. “We will strengthen our status in the global market by winning more orders through improved technology.”
KSOM continued to rise, gaining 0.37% on Tuesday. Samsung Heavy, however, fell 1.47%, while Hyundai Heavy took a bigger hit, losing 9.2% when the Suez Canal reopened.
Two weeks ago, Daewoo Shipbuilding & Marine Engineering said it had won a 265 billion won order for three very large gas carriers (VLGCs) from a European shipowner. With the deal, DSME has won orders worth $ 1.8 billion so far this year, 23% of its target of $ 7.7 billion.
Analysts say the deals signal a resurgence of South Korean shipbuilders, which are benefiting from growing global demand for freight spurred by the growth of e-commerce amid the coronavirus pandemic.
“Freight rates for container ships have been very high in the past 10 months since June 2020, as stimulus packages in key countries have boosted demand for cargo,” said Kim Hyun, analyst at Meritz Securities . “As a result, the Ocean Alliance and Alliance shipping lines, which have relatively smaller megaship fleets, have been increasing their orders since the fourth quarter of 2020.”
The Ocean Alliance consists of the COSCO of China, the CMA-CGM of France and Evergreen Marine of Taiwan, while the Hapag-Lloyd Alliance, the Japanese company ONE, the South Korean company HMM and Yang Ming Marine Taiwan Transport are members of the Alliance. The Danish Maersk and the Swiss-Italian MSC, the two largest shipping companies in the world in terms of shipping capacity, are part of the 2M Alliance.
Kim and other analysts also believe that South Korean shipbuilders could benefit, as the obstruction of the Suez Canal highlights their expertise in building oversized container ships.
Traffic on the waterway resumed on Monday after the full salvage of the stranded cargo ship Ever Given, ending the blockage of one of the world’s busiest shipping lanes and the shortest regular sea route between Europe and the ‘Asia.
“As capacity grows larger, South Korean mega-ship-oriented shipbuilders are in a better position,” Daishin analyst Lee Dong-heon said. “Shipowners and shipping companies are always careful with their orders because a ship is used for 25 years after it is built, and it costs between 100 billion won and 200 billion won per ship.”
Additional reporting from Nikkei staff editors Mao Kawano in Imabari, Japan, Takeshi Kumon in Ismailia, Egypt and Akane Okutsu in Tokyo.
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