DSME Cancels Order as South Korean Shipbuilders End 2020 With Recovery
South Korea’s Daewoo Shipbuilding & Marine Engineering said in a regulatory filing that it had canceled a shipbuilding contract valued at $820 million due to failures by the shipowner.
The news of the cancelation came at the end of a strong recovery by the Korean shipbuilders during the second half of 2020. DSME said the cancelation would have no impact on 2020 results, but that its orders would be down versus the prior year.
DSME said that the contact had been a conditional order received in December 2019 for six containerships. The unnamed shipowner reportedly had failed to fulfill some of the terms of the contract. They did not specify if it was a failure to make advance payments, secure financing, or other actions that the shipowner had not completed.
The cancelation will have no impact on the company’s previously reported results as the contract had never gone into effect. The order had been counted in 2019’s order book and as such represents a decline in the company’s backlog, but does not change the figures reported for 2020.
After strong declines in the first half of 2020 attributed to the impact of the pandemic, DSME like most of the major Korean shipbuilders reported a flurry of activity in the second half of the year with several large orders late in the year. DSME reported that it had won orders worth $4.06 billion in 2020, however, it only attained 56 percent of its target for the year.
Business Korea citing data from Clarkson Research reported that South Korean shipbuilders would retain their global top spot in 2020 in terms of shipbuilding order volume for the third consecutive year. Traditionally second to the Chinese shipbuilding industry, the Korean yards outpaced the Chinese in the second half of 2020. In the five months through November, the Korean yards outpaced the Chinese booking 60 percent of the global orders. In the last two months of 2020 they booked orders for 85 vessels valued at more than $11 billion.
At the beginning of December, DSME reported it had won an order for three crude oil tankers from ADNOC, a state-run oil company in Abu Dhabi, the United Arab Emirates. Valued at approximately $260 million, the order calls for the delivery of the ships by the first quarter of 2023. A letter of intent was also signed to build 10 LNG-powered very large crude carriers (VLCCs) for a European client. This would be the first time DSME has built 300,000 DWT dual-fuel VLCCs. DSME has been working to expand its scope of work into VLCCs from container ships, shuttle tankers and LPG tankers.
During 2020, DSME won orders for nine LNG carriers and floating storage as well as for four container ships, two shuttle tankers, five very large crude carriers (VLCCs), and one very large crude gas carrier (VLGC).