South Korean Yards: Another Order Cancelled

Samsung Heavy Industries said on Friday that a 907 billion won ($777 million) order for a substructure for a FLNG has been cancelled.

Yonhap news agency reports that the South Korean shipbuilder saying that the order, which came from an unspecified European firm, was cancelled as the firm did not issue a work order by a deadline agreed upon.

New vessel orders won by South Korean shipbuilders between January-September have fallen by 87 percent compared to the same period in the previous year, steeper than a 72 percent drop in global orders, partly due to less domestic orders compared with competitors in Japan and China.

The nation's big three shipyards, Samsung Heavy Industries, Daewoo Shipbuilding & Marine Engineering and Hyundai Heavy Industries, suffered a combined loss of over eight trillion won last year. It was the first time that all three registered losses, largely due to delays in the construction of offshore platforms and a sharp drop in new orders, says Yonhap.

Restructuring

Daewoo Shipbuilding & Marine Engineering said on Friday that it plans to spin off its IT business next year in an effort to streamline business. The spinoff is part of the shipyard's restructuring which includes asset sales and a reduction in workforce. It aims to reduce employee numbers by about 20 percent to 10,000 by the end of this year.

In November, Hyundai Heavy Industries announced its decision to split into four companies, with its non-shipbuilding businesses being spun off to improve management efficiency.

A Brighter Future

While Korean shipyards are struggling as a result of falling orders, the future may look a little brighter as global oil prices look to exceed $50 per barrel. The global oil prices have traded in a range of $40 to $50 per barrel since March. 

At the end of October, South Korea's finance minister said the government planned to support orders of 250 or more vessels by 2020 to help local shipbuilders.