Weak won woos owners

The weakened won has given boosted Korean yards` profits and competitiveness.

Nobody could fail to notice the dramatic fall in the value of the Korean won: from 900 to $1 in autumn last year to over 1,600 by March this year. With the banking system under suspicion, western banks refused to accept guarantees from many Korean banks, preventing yards securing orders. Now the won has recovered to 1,388 to $1, the situation is more stable and many yards have signed a stream of orders. Some within the industry say this is the result of rock-bottom prices but the yards themselves say many are projects which had been on hold during the worst of the currency crisis.

With the weakened won, the prospects for Korean yards are good, allowing increased competitiveness and profits. However, these profits relate to contracts signed (in $) two years ago when the won was much stronger. Various yards report newbuilding prices down by between five and 25 per cent, depending on yard and vessel type, against the third quarter of last year. In two years time when these vessels are delivered, it could well be that the yards make losses on the project. One senior Korean executive in London commented that “some of the marginal shipbuilders are ready to commit financial suicide.” Some shipowners, on the other hand, have taken the opportunity to place orders while the prices are good.