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Shipbuilding boom creates positive effects for steel industry

Marine transportation, shipbuilding and the steel industry have all been thriving as of late, backed by signs of an economic recovery. The increase in transportation via the sea ― due to increased demand for supplies such as electronics and household goods during the pandemic ― has created a virtuous cycle, with a surge in demand for shipbuilding as well as for steel.

Local shipbuilders have been seeing a boom in sales, recording the most in sales since 2008. According to the British shipbuilding and marine industry tracker, Clarkson Research Services, total global compensated gross tonnage (CGT) in the first quarter of this year has grown 4.3 times, compared to the same period last year. Among the total, Korean shipbuilders placed at the top of the list, with 532,000 CGT, accounting for 52 percent of the global market. It is a significant rise ― amounting to an increase of tenfold ― considering the fact that local shipbuilders were only able to procure 55,000 CGT in the same period last year.

Starting this year, Samsung Heavy Industries has won large-scale orders and some believe that the shipbuilder could start to recover from the financial crisis, in which the company had accumulated losses for the past six years. Samsung Heavy Industries has already won orders for 42 ships this year, worth $5.1 billion, which is 65 percent of its sales goal of $7.8 billion this year. During the last month alone, it won 20 container ship orders worth 2.8 trillion won.

Korea Shipbuilding & Offshore Engineering won a total of 68 vessel orders worth $5.5 billion won, achieving 37 percent of its sales goal for this year. Daewoo Shipbuilding and Marine Engineering (DSME) secured 19 orders worth $1.79 billion, reaching 23 percent of its sales goal. The numbers are significant, as normally, the shipbuilding industry secures more orders near the end of the year than at the start.

Stock prices have also soared in the past month for shipbuilders: 19 percent for Korea Shipbuilding & Offshore Engineering, 15 percent for Samsung Heavy Industries and 13 percent for DSME.

These positive effects are being seen not only in the shipbuilding industry but also in the automotive and construction industries, giving some breathing room for the local steel industry, which was hit hard by both the pandemic and increasing competition, lowering demand. There has been an increase in the demand for steel from automakers as well as from shipbuilders, allowing steel companies to increase costs.

Although iron ore prices have been on the rise over the years, steel companies previously had to freeze product rates due to low demand. Beginning this year, POSCO has been successful in negotiating price hikes with the three shipbuilders for steel plates ― the first price hike since 2016. Hyundai Steel is also in negotiations with shipbuilders to raise prices.

The Chinese government’s goal of achieving carbon neutrality by 2060 has been affecting Chinese steelmakers’ production capacities, as steelmaking procedures are known for their high carbon emissions, which has raised demand for Korean steelmakers. If Chinese steel production continues to decline, industry watchers believe that these conditions will benefit the Korean steel market.
Source: Korea Times

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