Korean yards facing decline in orders

BNP Paribas SA said newbuilding orders will slow amid a global credit crunch and economic slowdown. The liquidity crunch is making it difficult for shipowners to borrow money and slowing economic growth is undermining trade. “In the face of tighter market liquidity, increased trepidation toward further global economic slowdown and orders books of longer than three years, we forecast Korean orders will shrink by 19% next year amid another 25% drop in global orders,” BNP’s James Yoon said in the a report.

New orders worldwide in September were 7 million deadweight tonnes, 66% less than a year earlier, analysts Park Sang Kyoo and Lee Hyun Jae at Morgan Stanley said. Ship prices are also starting to soften, they said. Shipbuilders’ share prices are also falling on concerns that they will report bigger hedging losses as the Korean won dropped to the lowest since 2002. Shipbuilders expected the won to rise this year and bought forward currency contracts to hedge against their dollar-denominated orders.

“The weaker won will mean bottom line at the shipyards may be smaller than expected this year because of the losses from hedging,” Lee Bong Jin, an analyst at Eugene Investment & Securities Co., said in Seoul.

Korea Development Bank and Korea Asset Management Corp., who are selling their

50.4% stake in Daewoo shipyard, may cancel the sale should bidders submit prices below expectations on 13 October according to an unidentified Korea Development Bank official.