The offshore plant businesses of domestic shipbuilders are being directly hit by low oil prices. The companies haven’t yet received any orders this year at all. The businesses were once considered saviors in the shipbuilding industry, but they have now become liabilities. As domestic shipbuilders have practically stopped receiving orders for offshore plants, they are forced to restructure their businesses.
According to sources in the shipbuilding industry on April 13, the first-quarter orders received by Korea's “big three” shipbuilders – Hyundai Heavy Industries (HHI), Samsung Heavy Industries (SHI), and Daewoo Shipbuilding and Marine Engineering (DSME) – amounted to only US$5.13 billion (5.66 trillion won). SHI is in the lead with US$2.3 billion (2.54 trillion won), following HHI with US$1.43 billion (1.58 trillion won), and DSME with US$1.4 billion (1.54 trillion won).
Among the orders received, however, there was not a single order for offshore plants. After oil prices started falling in earnest in November last year, there have been no contracts signed for offshore plants, which hits the big three shipbuilders quite hard, as they had absolute influence in the offshore plant market.
In 2013, they accounted for 70 to 80 percent of the world’s total offshore plant orders, winning the biggest number in the world. However, the situation rapidly changed as high oil prices plunged.
HHI recorded only US$5.6 billion (6.17 trillion won) of offshore plant orders last year, falling short of the target figure of US$7.3 billion (8.05 trillion won). SHI received US$3.2 billion (3.53 trillion won) in orders last year after its target of US$8.9 billion (9.81 trillion won). The figure was less than half of the target, and far short of the target amount. Even though the DSME met its annual overall amount of target orders last year among the top three, it only recorded US$3.7 billion (2.98 trillion won) in offshore plant orders, which was substantially far below the segment's specific target value of US$8.1 billion (8.93 trillion won).
An official from the shipbuilding industry said, “Even though the domestic shipbuilders were strong in offshore plant businesses, they are struggling with the businesses due to the fall in oil prices. However, the oil prices are expected to fluctuate, rebound and increase in the long term.”