Posidonia: DSME Secures its First Order of 2016

The DSME-built Maran Carina, owned by an Angelicoussis subsidiary (file image courtesy Maran Tankers)

Daewoo Shipbuilding and Marine Engineering has secured its first firm order of the year – two LNG carriers and two VLCCs for subsidiaries of Angelicoussis Shipping – DSME announced Thursday at Posidonia. At $580 million it is the largest contract won by a Korean yard in the year to date, and options for additional vessels could bring its total value to more than $1 billion.

Angelicoussis is a long-time customer of DSME: the firms have been doing business since 1994, with orders totaling to nearly 90 ships (about 20 currently under construction).

"Though the company is struggling, the contract will open sluice gates down the road and the company is working hard to overcome the setbacks," DSME President Jung Sung-leep said at a news conference.

DSME has also been linked to an Iranian tender for five high-spec jackup rigs, worth approximately $1 billion, but so far it has not finalized that deal; Iranian Offshore Oil Company is said to be in talks with other yards as well.

DSME has been under heavy financial pressure and the orders will come as welcome news to its creditors, who are working with the yard on a self-rescue plan to slim down operations and spin off subsidiaries in light of the global slowdown in shipping. South Korean shipbuilders' troubles are severe enough to prompt central government action in support of their state-owned lenders.

DSME is also under investigation for alleged past accounting fraud intended to cover up the extent of its difficulties; its offices were raided by authorities Wednesday.

Allied Shipbroking's head of market research and asset valuation, George Lazaridis, said in a Wednesday newsletter that shipowner sentiment at Posidonia this year is negative on the business outlook. He cautioned owners to restrain ordering: he fears a quick return to newbuilding activity if day rates pick up. "It will be a while before a proper balance between supply and demand has been achieved and we have managed to shrink the orderbook down to size, but fears are that we may see a trickle back into old bad habits, with new orders being placed as soon as the market starts to pick up once more, continuing the two year cycle pattern that has been noted ever since the market crash of 2008," he said.

Nikolas Tsakos, president of Tsakos Energy Navigation and chairman of INTERTANKO, also discouraged ordering activity – he joked that the industry body was going to sponsor a "newbuilding addict center" at troubled yard STX, where compulsive ship orderers could break champagne and celebrate without actually taking a delivery, thereby keeping the industry healthy and profitable.