South Korea's shipbuilding industry shows "localized torrential rain" in the second half of the year

2016-07-12 09:00

A survey by the Korea Chamber of Commerce and Industry (KCCI) indicates that the South Korean shipbuilding industry will face a "localized downpour" in the latter half of this year, continuing to struggle due to the ongoing global economic downturn and decreasing new ship orders.

The KCCI recently collaborated with over 10 South Korean industry associations and groups to survey the "second-half industrial outlook" and published the results on the 11th. The results show that construction, oil refining, and petrochemicals face "a few clouds," while IT and home appliances, automobiles, machinery, and steel are "gloomy." The shipbuilding industry, however, is depicted as experiencing a "localized downpour." Construction is expected to be the most positive sector in the second half of the year, benefiting from factors such as the comprehensive review bidding system, increased new home sales due to low interest rates, and growing demand for income-generating real estate.

Clarksons data shows that South Korean shipbuilders received only 830,000 CGT in orders during the first half of this year, an 88% decrease compared to 6.85 million CGT in the same period last year.

This is the lowest first-half order volume for South Korean shipbuilders since Clarksons began tracking new ship order data in 1996. In comparison, the previous low point was in the first half of 1999 with 6.51 million CGT, and 7.79 million CGT during the global financial crisis in the first half of 2009.

In its second-half forecast, the KCCI stated that the South Korean shipbuilding industry faces significant challenges compared to other sectors. Weakening global division of labor has led to reduced capacity and ship orders. Furthermore, the uncertainty surrounding the European economy after Brexit has increased, and with Europe accounting for over half of shipbuilding orders, the spread of economic unease raises concerns among industry professionals about potential order cancellations. There are also concerns that global oil companies may delay investments in offshore engineering equipment.

The KCCI believes that South Korean shipbuilders should thoroughly assess their current situation.

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