(Yearender) Shipbuilders likely to see silver lining next year

By Nam Kwang-sik
SEOUL, Dec. 20 (Yonhap) -- The struggling South Korean shipbuilding sector may
stage a modest comeback next year as the global economy shows signs of a recovery
and local shipbuilders diversify their portfolios, analysts say.
The local shipbuilding industry was pounded by the U.S.-triggered economic crisis
throughout 2009 with local shipbuilders setting their sights on the wind power
business and other revenue sources in a bid to avoid complete stagnation.
"Local shipbuilders are expected to see a slight rise in their new orders next
year as the global economy emerges from the worst of the downturn," said Kim
Hong-gyun, an analyst at Hanwha Securities Co., adding that new orders will not
be enough to trigger any new boom in the shipbuilding sector.
Sung Ki-jong, another analyst at Daewoo Securities Co., agreed with Kim, saying
local shipbuilders are predicted to cast a hungry eye on new orders next year.
The Ministry of Knowledge Economy said on Nov. 9 that the economic crisis sent
new orders clinched by local shipbuilders falling 90 percent on-year in the first
nine months of the year.
The industry's players, including Hyundai Heavy Industries Co., Samsung Heavy
Industries Co. and Daewoo Shipbuilding & Marine Engineering Co., received 47 new
orders during the January-September period, compared to 655 vessels won for the
whole of 2008.
Between April and October of this year, South Korean shipyards failed to maintain
their world No. 1 ranking in new orders for vessels as Chinese rivals overtook
them. In November, local shipbuilders managed to regain their ranking.
According to London-based market researcher Clarkson Plc., South Korean shipyards
received orders equivalent to 716,097 compensated gross tons (CGT) in November,
taking up 71.7 percent of worldwide total new orders, compared to the 255,895
CGTs won by Chinese rivals.
As part of efforts to combat their dry spell, shipbuilders diversified their
business portfolio this year.
Local shipyards Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo
Shipbuilding & Marine Engineering have plunged into the wind power business to
secure new growth engines.
In September 2008, the world's largest shipbuilder said it plans to invest 102
billion won (US$86.7 million) in a plant that makes wind power generators by
February 2010. One year after its announcement of the investment for the plant,
Hyundai Heavy Industries won an order to provide six 1.65-megawatt wind turbine
generators to Wave Wind LLC., a U.S. firm by March 2010.
In the wake of Hyundai Heavy Industries' move, Daewoo Shipbuilding & Marine
Engineering, the world's third-largest shipbuilder, acquired DeWind Inc., a U.S.
wind power company for $50 million in August 2009. The shipbuilder plans to spend
$70 million to help DeWind develop new models and to build a wind farm in Texas
in the future.
Samsung Heavy Industries, the world's No. 2 shipyards, delivered in November its
2.5-megawatt wind power generator to Cielo Wind Power, a U.S. company.
Analysts, however, said that the wind power business will be able to contribute
to increase profits of the local shipyards in 2011 at the earliest.
"Combined sales at Samsung Heavy Industries and Daewoo Shipbuilding reached about
13 trillion won this year, but their sales in the wind power business stood at
only 1 trillion won," Sung said.
ksnam@yna.co.kr
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