Korea’s shipbuilding industry suffered from massive losses in the third quarter of this year due to suspension or cancellation of offshore rig projects, much higher than previously announced, revised data showed Thursday.
Following revised estimates released by the companies, the nation’s top three shipbuilder ― Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding and Marine Engineering ― logged a combined operating loss of 2.1 trillion won ($1.84 billion), as against 1.8 trillion loss announced a week earlier.
Samsung and Hyundai revised their quarterly results after receiving notices of cancellation offshore projects.
“Without oil price and market recovery, a series of project cancellations will continue to haunt the shipbuilders,” an analyst said.
The quarterly loss came at a time when the shipbuilding industry crisis is deepening with the oil glut and reduction in backlogs.
Some industry watchers say drilling companies try to reduce expenditure by scrapping contracts and blaming shipbuilders for delay in the rig’s delivery to evade damages.
They said it is because plunging energy prices are shaking up oil producers and forcing offshore oil rigs to go idle.
Just in four days, Samsung Heavy Industries revised its third quarter result to 10 billion won of losses from operating profit of 84.6 billion won as Pacific Drilling scrapped a drillship order.
Hyundai Heavy’s losses were widened after Norwegian offshore rig firm Fred. Olsen Energy terminated its contract for the construction of a semi-submersible drilling rig due to a delay in the rig’s delivery which was initially planned for March this year.
Hyundai’s operating loss widened to 897 billion won, up 32.3 percent from 678 billion won that the firm announced on Oct. 30.
Daewoo Shipbuilding also reported an operating loss of 1.22 trillion won as it set aside provisions for potential order cancellations and increased costs.
The outlook of the troubled shipbuilding industry in the last quarter remains murky as the sector faces a protracted slump.
To make the situation worse, shipping companies are canceling nonbinding options to order additional container ships.
The Korean shipyards have been shifting their focus on LNG and container ships as they saw their losses snowball on offshore plant projects.
On Monday, the world’s biggest container-ship operator Maersk said it scrapped the option to buy six ships of Triple-E from Daewoo Shipbuilding.
“Maersk placed orders of 11 ships in June and the option was included in the deal. But the company informed us yesterday that it won’t exercise the option for further orders,” a company official said.
Hyundai Heavy Industries also received suspension notice from Maersk for eight container ships with a capacity of 14000 twenty-foot equivalent.
By Park Han-na (hnpark@heraldcorp.com)
