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Korean yards escape low oil price impactin Shipbuilding

South Korean shipyards may not be that badly affected by lower oil prices as they are taking steps to diversify into the construction of LNG-fuelled ships and other types of ships, said an analyst in a research note.

Korean yards escape low oil price impactin Shipbuilding
15 December 2014 - 00:43

Korean yards escape low oil price impact in Shipbuilding 
South Korean shipyards may not be that badly affected by lower oil prices as they are taking steps to diversify into the construction of LNG-fuelled ships and other types of ships, said an analyst in a research note.
CIMB Securities analyst KJ Hwang said, “Given the drop in offshore orders caused by weak oil exploration and production (E&P) capex, the Korean yards choose to pursue yard migration and selective bids for the profitable production platforms.
“Therefore, limited risks are expected to backlog accretion potential ahead, as the absence of drilling rigs could be supplemented by the relatively stronger recovery in tankers, still-firm gas carrier orders, and new replacement demand for overall commercial vessels premised on the new fuel designs.”
As regards Shell’s order of a special LNG-bunkering vessel from South Korea’s STX Offshore & Shipbuilding on 5 December, Hwang regarded it as a strong commitment to invest in LNG fuel infrastructure, offering higher visibility to the new era of LNG-fuelled ship orders ahead.“Shell’s order follows the International Maritime Organization’s recent agreement on gas-powered shipping rules in November 2014,” he said. 
“LNG fuel designs will trigger strong replacement orders, which cannot be retrofitted by simply changing the engine spectrum.”Hwang advised to invest in Korean shipyards. “The newbuilding price is improving and year-to-date delivery market share is unscathed at 34%,” he explained. 
“Korean yards’ strong track record to continue commanding high-quality orders, offering sustainable topline growth and stronger margin prospects in FY16-18.”Hyundai HI was selected as a top pick.

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