Hyundai Heavy plans to raise prices

Korean builders get a shot in the arm from growing demand for fuel-efficient vessels

PUBLISHED : Tuesday, 09 July, 2013, 12:00am
UPDATED : Tuesday, 09 July, 2013, 5:23am

Hyundai Heavy Industries, the world's biggest shipbuilder, plans to raise prices as demand for fuel-efficient vessels helps it skirt the global supply glut hurting Chinese yards.

Orders might exceed this year's target of US$11.3 billion, with about 60 per cent of that already met, said Ka Sam-hyun, executive vice-president in charge of ship sales. The South Korean company planned to raise prices in the second half, he said.

The big focus right now is on fuel efficiency. At a time when prices have fallen so much, shipping lines seem to be willing to pay a bit more to get better-performing ships on time

"The big focus right now is on fuel efficiency," Ka said. "At a time when prices have fallen so much, shipping lines seem to be willing to pay a bit more to get better-performing ships on time. This is why the top-tier shipyards will benefit."

Hyundai Heavy's optimism helped drive up shares of Korean shipbuilders yesterday and contrasts with gloom over Chinese shipbuilders. A third of China's yards might shut down in about five years as they struggled to win orders, an industry group said last week. Korean yards, which have dominated the construction of mega ships, are benefiting as lines including Moeller-Maersk order bigger, fuel-efficient vessels.

Hyundai Heavy climbed 3.4 per cent while Hyundai Mipo Dockyard leapt 4.9 per cent. Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering also rose.

"News about ship prices rising is lifting shares of shipbuilders," said Lee Jae-won, an analyst at Tongyang Securities.

In contrast, China Rongsheng Heavy Industries plummeted 11.2 per cent in Hong Kong trading. The country's biggest yard outside state control was seeking government financial support as orders and prices declined and might post a loss in the first half, it said last week.

About 483 shipyards in China won US$10.5 billion worth of orders in the first six months of this year, while 94 builders in Korea got US$18.5 billion, according to Clarkson, the world's biggest shipbroker.

Chinese yards, which dominate bulk-carrier construction, won 21.2 million deadweight tonnes (dwt) of orders in the first half, compared with 16.6 million dwt for Korean companies, according to Clarkson.

The order book at Chinese shipbuilders fell 23 per cent at the end of May from a year earlier, according to the China Association of National Shipbuilding Industry. A third of the country's yards facing the danger of closing had failed to get orders "for a very long period of time", Wang Jinlian, the group's secretary general, said last week.