Orders surge! Daewoo Shipbuilding & Marine Engineering makes a comeback!
2017-08-18 09:00
Since the beginning of this year, Daewoo Shipbuilding & Marine Engineering (DSME), a representative mid-sized shipbuilding company in South Korea, has seen a rapid increase in new ship orders. In the first half of the year alone, its order intake has reached about double its annual target, and it is unable to accept more orders due to capacity constraints. DSME, which once teetered on the brink of bankruptcy and underwent restructuring, has finally been revived. The resurgence of DSME is another example of the recovery in the global shipbuilding market, and it also signifies a full recovery of the South Korean shipbuilding industry.
According to South Korean media reports, while other shipyards in South Korea have temporarily closed their docks due to reduced workloads, DSME has secured work for the next two years. Furthermore, unlike most South Korean shipyards, DSME is also increasing the number of newly hired employees.
In the first half of this year, DSME received orders for 14 115,000 DWT aframax oil tankers The total value of these orders reached 600 billion won (approximately US\$530 million). Including optional orders, DSME's order intake in the first half of the year reached 18 vessels, more than double its annual target of 8 vessels.
Daewoo Shipbuilding & Marine Engineering was established during the boom in the shipbuilding market in 2004. However, the global economic downturn in 2008 led to financial difficulties for the shipyard. In 2009, the Korea Development Bank, as the main creditor, undertook a series of restructuring efforts. In 2014, DSME filed for bankruptcy protection.
Industry insiders say that the main reason for DSME's revival is that employees voluntarily took early retirement, returned salaries, and took turns on unpaid leave, sharing the burden with the company and helping to improve DSME's cost competitiveness. Compared to 2015, DSME's annual personnel expenses decreased by 40%. Since its establishment, DSME's labor union and management have had no disputes, which has contributed to DSME's restructuring. In addition, DSME's strategy of focusing on the aframax tanker market, where it has the most confidence, and improving its technological capabilities, is also one of the main reasons for its competitiveness in the new shipbuilding market.
Due to the increased workload, DSME adopted a special work system in early August, allowing all employees only one week of vacation; meanwhile, other shipyards in South Korea mostly gave employees two weeks of summer vacation. In the first half of the year, DSME hired 20 new employees, and plans to hire more in the second half of the year.
Park Yong-Duk, CEO of DSME, said that DSME can build 12 new ships annually. Therefore, even if ship owners want to order new ships now, DSME cannot accept more orders due to capacity constraints.
Since the beginning of this year, the order intake of South Korea's three major shipbuilders has far exceeded expectations. Now, mid-sized shipbuilding companies such as Hyundai Heavy Industries, Samsung Heavy Industries, and DSME are also recovering. This confirms that the global new shipbuilding market has indeed bottomed out and begun to recover. On the other hand, the full recovery of the South Korean shipbuilding industry will also bring new challenges to the struggling Chinese shipbuilding industry.
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