Merger on the horizon for South Korea's two largest shipyards
THE Korea Development Bank (KDB), the owner of a 55 per cent stake in Daewoo Shipbuilding and Marine Engineering (DSME), is engaged in moves to merge with the world's largest shipyard Hyundai Heavy Industries (HHI)
11 February 2019 - 19:00
Korea's Yonhap news agency said the bank has signed an agreement to sell its controlling stake in DSME to HHI. It quoted bank chairman Lee Dong-gull as telling reporters it would 'contact Samsung Heavy, another potential buyer, to see if it is interested in Daewoo Shipbuilding as well.'
If the deal proceeds, a holding company would be set up to operate both DSME and HHI, reported American Shipper.
Korean Broadcasting System said the bank would hand 60 million DSME shares to the new company and boost DSME's capital by KRW2.5 trillion (US$2.2 billion).
Yonhap noted that 'South Korean shipbuilders, once a cornerstone of the country's economic growth and job creation, had been reeling from mounting losses in the past few years, caused by an industry-wide slump and a glut of vessels amid tough competition with Chinese rivals.'
It said up to KRW10 trillion has been spent to salvage DSME.
Korea Broadcasting says DSME's labour union expressed opposition to the merger because of concerns that it may result in mass layoffs and 'threatened a general strike unless the plan is scrapped.'
Clarkson said shipbuilding contracts were placed with the leading manufacturing countries in 2018 as follows: Korea, 12.6 million compensated gross tonnage (CGT) or 44.1 per cent; China, 9.2 million CGT or 32.2 per cent; and Japan, 3.6 million CGT or 12.6 per cent. European shipyards were given contracts for 2.4 million CGT or 8.4 per cent.
With the requirement that ships start using low sulphur fuel globally starting in 2020 or equip their ships with scrubbers to remove sulphur oxides from their engine emissions, Clarkson estimated one third of ships on order has scrubbers on order. It said 14 per cent of orderbook tonnage is capable of using liquefied natural gas (LNG) as fuel.
Danish Ship Finance said there were 590 shipyards globally with a combined capacity of 45 million GCT. It estimates only 150 yards had received new orders in 2018 and that orders were 'unevenly distributed', with 10 yards accounting for 57 per cent of orders as measured in CGT.
It warned that '290 yards, representing 28 per cent of global yard capacity, will run out of orders within the next 12 months'.
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