Has the ship sailed on big shipyard M
Day and night on this tiny island at the southern tip of the Korean peninsula, workers at Samsung Heavy Industries’ overcrowded shipyard assemble giant steel blocks into huge cargo carriers and oil drillships.
Churning out one ship a week and still sitting on 40 months’ worth of orders, Samsung’s (010140.KS: Quote, Profile, Research, Stock Buzz) only concern appears to be lack of space to build more vessels.
But analysts say the seemingly buoyant shipbuilding industry may soon be heading into a multi-year downcycle, and bold efforts to buy up other shipbuilders currently led by South Korea’s Hyundai Heavy Industries (009540.KS: Quote, Profile, Research, Stock Buzz) and STX Shipbuilding (042660.KS: Quote, Profile, Research, Stock Buzz) could backfire in a costly way.
Investors are already abandoning ship, with shipbuilders losing more than a third of their value in as many months.
Analysts say new ship orders are trending down and shipbuilding shares have not yet hit bottom cash advance. The slowing global economy is hurting worldwide trade and rising steel prices are squeezing profit margins.
“The industry’s major peak has certainly passed,” said PJ Yoon, an analyst at Samsung Securities. “Those who buy will assume the burden of weathering a downcycle.”
Last week, world No. 1 Hyundai Heavy joined a heated race to buy No. 3 Daewoo Shipbuilding & Marine Engineering (042660.KS: Quote, Profile, Research, Stock Buzz), a deal some market watchers estimate may cost up to $8 billion.
Meanwhile, South Korea’s STX Group, parent of No. 6 player STX Shipbuilding, is finalizing its buyout of Norway’s Aker Yards (AKY.OL: Quote, Profile, Research, Stock Buzz), Europe’s biggest ship maker. The deal cost STX $1.3 billion, including the latest $636 million tender offer.
Filed under: online by Wolf