Korean shipbuilders fear worsening earnings

South Korean shipbuilders may see their earnings worsen further this year due to the rising price of steel plates and the strengthening won. Hyundai Heavy Industries posted $35.5 million in profit last year, but this was 67.8% lower than a year earlier.

Samsung Heavy Industries also saw its net profit drop 65% to $6.5 billion won last year while Daewoo Shipbuilding & Marine Engineering managed to post $29 billion in net profit last year, down just 5%.

Last year South Korean shipbuilders won the largest amount of orders in the world at 17.3 million tonnes compared with Japan ‘s 12.2 million tonnes. However, the price of steel plates jumped by more than 50% last year, eating into shipbuilders’ earnings and the fear is that steel prices are expected to rise again this year.

Adding to the problem is the strong local currency which gained more than 15% against the U.S. dollar last year. This is of great concern since Korean shipbuilders usually undertake shipbuilding contracts on a dollar basis, meaning the weakening dollar, when converted into the local currency, would reduce earnings.