Time To Merge The Big Three South Korean Shipbuilders?

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Yes! Says South Korea’s former strategy and finance minister Yoon Jeung-Hyun; the Big Three shipbuilders should consider merging.

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Last week a Mfame article discussed on  Strategies to overcome the existing challenges in the shipping sector.  Today as anticipated South Korea’s former strategy and finance minister Yoon Jeung-Hyun has suggested that the ‘Big 3’ South Korean shipbuilders, by merging their operations, can tide over the downward cycle the shipping industry is going through.

Speaking to employees of the Financial Supervisory Service, Yoon said, “It is urgent for an oversupplied industry to be restructured.  The number of South Korea’s shipbuilding giants, such as Hyundai Heavy Industries (HHI), Samsung Heavy Industries (SHI) and Daewoo Shipbuilding & Marine Engineering (DSME), needs to be cut down to one or two.”

The former minister’s suggestion coincides with the failure of SHI and DSME to win business in the first quarter, whereas HHI has managed to secure five oil tanker orders during the same period.

KDB Daewoo Securities analyst Sung Ki-Jong noted that HHI, SHI, and DSME are struggling with uncertainties, but believes that losses from offshore plants are bottoming out.

“Given depressed global growth and persistently low oil prices, shipbuilding orders will inevitably decline. But we see limited risks of additional losses from offshore plants and expect the merchant vessel segment to turn profitable thanks to lower exposure to low-priced orders” he added.

Source: Fairplay

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