As the shipbuilding industry enters a “super cycle” boom with all-time performance, shipbuilding value chain companies also on the rise

As the shipbuilding industry enters a “super cycle” boom with all-time performance, shipbuilding value chain companies that exclusively supply equipment to shipyards are also on the rise.

According to the Korea Exchange on the 1st, HD Hyundai, whose subsidiaries include HD Hyundai Heavy Industries, the domestic shipbuilding giant, touched the 52-week high of 85,000 won during the day.

HD Hyundai Heavy Industries also closed at 214,000 won on the same day, rising 68% from the beginning of the year and hitting a new 52-week price the previous day. HD Korea Shipbuilding & Marine Engineering Co., the middle holding company of HD Hyundai, rose 79 percent year-on-year. Samsung Heavy Industries also rose 48% throughout the year.

The shipbuilding industry, which has been alienated from the capital market, has been recording all-time performance records by blue-chip companies that have survived intense restructuring over the past decade. The slump has begun since 2008, when global ship replacement orders were placed, and before COVID-19, it was directly hit by a drop in oil prices and a decrease in orders.

However, shipbuilders have been increasing their work, focusing on high value-added ships, even when global orders for new ships have decreased in the first half of this year. It has already secured three to four years’ worth of work, focusing on high-value-added ships such as liquefied natural gas (LNG) carriers and ammonia ships.

In particular, the newly built ship price index (Shinjo Ship) recorded 187.23 as of June (Clarkson Research) and has been steadily rising. The new shipbuilding index is an index that compares ship prices after viewing the global shipbuilding price as 100 as of 1998. The larger the number, the higher the ship price. It is close to the 2007-2008 index figure during the early boom of the Joseon Dynasty.

As a result, the work of shipbuilding equipment companies is also increasing. The shipbuilding equipment industry has grown steadily as a small number of companies have exclusively supplied it. Their performance was directly affected by whether they won orders from shipbuilders and increased sales.

Among shipbuilding equipment companies, Sejin Heavy Industries has the highest stock price return compared to the beginning of the year, up 81% from the beginning of the year. Sejin Heavy Industries manufactures liquefied petroleum gas (LPG) tanks that can be loaded on ships and deckhouses, a living space for sailors on ships. It is located near HD Hyundai Group and has been growing by steadily winning orders for supplies.

As the number of LNG carriers increased, Dongsung Industrial Technology and Korea Carbon became busy. The two companies make a coolant that will fit in the ‘LNG cargo hold’ that will be mounted on an LNG carrier. Natural gas, a gas, must be transported in a liquid state to transfer a larger amount to the same area, increasing efficiency.

Hanwha Engine’s stock price, which sells engine parts centered on the manufacture of large ship engines, also rose 51% from the beginning of the year. Earlier this year, LNG carriers built in China stopped due to engine problems, raising doubts about Chinese-made ship engines, while Hanwha Engine is expanding its performance by receiving engine orders from Chinese shipbuilders. Sungkwang Bend and Taekwang, which manufacture pipe fitting for LNG carriers, are also seeing their stock prices rise compared to the beginning of the year.

Choi Kwang-sik, a researcher at Daol Investment & Securities, emphasized, “If the unit price of input into the second half of this year is reduced and the improvement of mix and on-site proficiency and productivity that will continue until 2026, the turnaround of the shipbuilding industry’s performance will be only the beginning.”
Source: Maeil Business Newpaper