| Unlisted shipbuilders face lower order activity |
| South Korea’s unlisted shipbuilders will become less aggressive in order activity, an analyst has predicted in a research note. Samsung Securities analyst Youngsoo Han said, "Most shipbuilding contracts are based on a heavy-tail payment scheme, so shipbuilders are responsible for working capital. Since players with funding difficulties are likely to struggle for new orders, they would continue to reduce capacity on sluggish orders and falling backlogs and restructure." He continued, "It is possible in part to agree with the idea that reduced order activity by unlisted builders will benefit listed ones." The analyst gave an example, "In the MR [medium-range] tanker market, South Korean shipbuilder Hyundai Mipo Dockyard would likely see some benefits from less competition from SPP Shipbuilding, which is now controlled by creditor banks, as the two shipbuilders account for a respective 34% and 16% of the global market for that vessel." "Regarding this, corporate bond issuances by listed shipbuilders at somewhat of a high rate have been well received by the market." he added. However, Han insisted, "Related benefits are not enough to spark a re-rating of shipbuilding shares, as weak shipbuilding prices and Korean shipbuilders’ order performances are not attributable to competition between domestic shipbuilders." He concluded, "Rather, weak currencies in Europe and rival countries particularly Japan and poor demand for offshore structures due to falling commodity prices are main factors of the competition." |