Marine and Shipbuilding Monthly Journal
Seoul Ra-11997(ISSN: 2005-3061)



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    Korean shipbuilding industry overcome the recession, their challenge to reclaim world No. 1 in 2011
    - Achieved the largest performance ever with the ship exports to 49.8 billion U.S. dollars in 2010
    Ministry of Knowledge Economy, Republic of Korea (Minister: Choi Kyung-Hwan) and Korea Shipbuilders' Association foresaw that the ships and marine equipment exports would register 5.6% decrease by $ 47 billion due to slump in new orders in 2009 to 2010.

    China is having a hard time due to the bulk carrier market slump, the pressure on shipbuilding industry restructuring and the rise in personnel expenses. However, it is likely Korea might be world No.1 in contracting due to containership, optimistic demand outlook for offshore plant, marine fuel regulations, etc.

    Korea was ranked world No.1 in contracting 2003 to 2008 and then China took over the world No. 1 in contracting 2009 to 2010.

    The ships and marine equipment exports in Korea 2010 registered an increase of approximately 10% compared with the previous year by showing $ 49.8 billion, recording the largest performance ever. It is expected to be No.2 following semiconductors.

    1. Outlook 2011
    It is expected that ship order quantity would register an increase of approximately 4% compared with 2010(3,380CGT) by showing 3,500CGT.
    This is faster than what we expected and likely to reach to order quantity before normal year 2006 to 2008. However, a full recovery trend was unclear. There is still the cause of anxiety like ship oversupply, fears of a double-dip recession in the US, the possible spread of European financial crisis.
    The size of world deliveries in 2011 is expected to register a decrease of approximately 9.5% compared with 2010(50.19millionCGT) by showing 45.40millionCGT due to the decrease in order quantity and delay in deliveries and also the size of Korean ships and marine equipment exports in 2011 is expected to register a decrease of approximately 5.6% compared with 2010($ 49.8 billion) by showing $ 47.0 billion.



    (1) Shipping Market Outlook
    1) The quantity of goods transported by sea
    The quantity of goods transported in 2010 registered an increase of approximately 9-12% compared with the previous year over 2008 levels. It is estimated to show similar growth.
    Oct 2010, IMF foresaw that world economy 2011 would show an increasing growth of about 4.2% and register an increasing trade growth of 7.0%.

    2) Containership
    Due to major industrial production growth and prospects for sustained economic recovery, it is expected to increase 10% in 2011 compared with the previous year.

    3) Bulk Carrier
    On the strength of the increase in volume of the quantity of transported main goods like iron ore, coal, it is expected to register an increase of 7% compared with the previous year.



    4) Ocean Freight Charges
    It showed the signs of recovery in 2010, but rather weak in the fourth quarter except for containership sector.
    It is expected to continue showing moderate rise (except for bulk carrier) in 2011.



    (2) Shipbuilding Outlook
    1) Order Quantity
    Despite the potential the main cause of the destabilization, the size of ship order quantity is expected to register an increase of approximately 4% compared with 2010(3,380CGT ) showing 3,500CGT on the strength of signs of recovery in shipping and shipbuilding sector due to the global economic recovery and the increase in volume of the quantity of transported goods by sea.
    According to shipbuilding forecast club, Clarkson in Oct 2010, demand for worldwide newbuilding is expected to register annual average 52.40millionCGT 2012 to 2019 and another shipbuilding forecast club, Fairplay foresaw in a report released on Jan 2011 that it is expected to register annual average 35.00-40.00millionCGT 2010 to 2015.
    It is especially estimated to register annual average order quantity approximately 33.10millionCGT 2016 to 2019. That can not reach to annual average 35.20millionCGT 1996 to 2009. However, it is in excess of 25.56millionCGT of annual average order quantity except for the upphase period from 2006 to 2008.

    2) Demand outlook by ship type
    Oversupply is concerned. Moreover, there is the bitter-sweet due to China's variables, global oil demand. Bulk carrier is expected to be on the slump due to oversupply, reduction of effect on raw material imports from the East Asia and tanker is expected to be neutral because of being liquidated of a single-hull vessel.
    Containership is expected due to global economic recovery. LNG carrier is expected due to high oil prices, the average annual demand growth of 5.2%. Offshore plant is optimistically expected due to high oil prices, the average annual demand growth of 5.7%.





    3) Order objectives by shipbuilders
    Due to recovery, it is expected that Korean large shipbuilders’ activities in order is likely to be raging and contract goals in 2011 has been compiled an increase 35% by showing $ 50.9 billion compared with 2010.
    Shipbuilding contract goals, you look at bereavement, Hyundai Heavy Industries (including Hyundai Heavy Industries) and STX Shipbuilding new orders in 2010 over 60% more than was raised considerably.
    Samsung Heavy Industries and Hyundai Mipo were set about 10%, Daewoo Shipbuilding was set same as 2010. Hanjin Heavy Industries received no orders in 2010 but was set $8 billion in 2011.

    4) Deliveries
    Massive new shipbuilding is waiting for the deliveries as order quantity was concentrated during the shipbuilding industry upphase 2006 to 2008.
    The size of global deliveries in 2011 is expected to register a decrease of 9.5% by showing 45.40 million CGT compared with 2010 50.19 million CGT. That is because of new orders slump and delay of delivery date due to reduction of order quantity 2009 to 2019 and also base effect due to the records in the largest volume of deliveries 2010.
    Korean deliveries in 2011 is expected to register a decrease of 5.9% by showing 14.60millionCGT compared with 2010(15.51millionCGT) due to new orders slump and reduction of orderbook.
    Korean large shipbuilders are holding approximately 2 years of orderbook in terms of at the end of 2010. There is also some possibility of slight increase of deliveries when it comes to Increase in new orders for delivery due to signs of recovery which is faster than expected.
    It is expected that the size of global deliveries decrease consistently next 5 years as contracting will return to normal level, passing by a upphase 2006 to 2008 and a dull season 2009 to 2010.

    5) Exports
    The size of the Korean ships, marine equipment, offshore plant exports is expected to register a decrease of 5.6% compared with 2010($ 49.8 billion) by showing $ 47.0 billion.
    That is because most of Korean shipbuilders build import vessels. Therefore, It is expected to effect on reduction due to the reduction outlook of deliveries in Korea.

    6) Shipbuilding capacity
    Competitive investment in facilities happened during shipbuilding industry upphase in 2003 to 2008, though. It is expected that global shipbuilding capacity will be reduced gradually for 5 years when contracting comes back to normal levels.
    The highest level was 56 million CGT in 2010 and it is expected to register a decrease of 38 million CGT in 2015.



    2. Any chance Korea rekakes world No.1 in contracting
    (1) Korea
    There is possible to be ranked No.1 in shipbuilding industry due to containership that gained a competitive advantage better than China, Optimistic demand outlook on LNG carrier, offshore plant, IMO emissions regulations and accelerating fuel efficiency competition.

    (2) China
    China is facing unfavorable factors like slump in bulk carrier, China’s main ship type, the pressure on shipbuilding industry restructuring because of rapid expansion shipbuilding facilities, and the rise in personnel expenses, and strengthening the yuan. However, strengthen relationships with European ship owners, high value-added ship LNG carrier, Increase in ship orders are being closely watched factor.

    3. Performance Analysis 2010
    The ship and marine equipment export 2010 registered an increase of 10% by showing $ 49.8 billion and it achieved the largest export performance.
    After global economic crisis in 2008 despite the cause of anxiety like ship oversupply, the possible spread of European financial crisis, recovery in shipping and shipbuilding sector rebounded faster than expected. The major factor was that high value-added ship, mega container ship, LNG carrier, drillship, offshore plant were delivered successfully during the upphase.

    4. Global trends
    The size of world ship order quantity in 2010 registered an increase of 134.2% by showing 3,380 CGT on the strength of the global economic recovery and the signs of recovery in shipping and shipbuilding sector.
    Korea, of which proportion of exports ship, is more than 90% is ranked world No.2 due to the recession in shipbuilding in the third index 2010, following China.
    China was ranked No.1 on quantitative index through orders of national ships, cost competitiveness, aggressive financial support for ships.
    China's orders of national ships registered 45% in 2009, was estimated more than 50 % in 2010.
    The new shipbuilding price of most ships slightly elevated in 2010 compared with the previous year, except for LNG carriers.



    5. Trends in Korea by key performance indicators
    (1) Contracting
    Contracting in 2010 registered an increase of approximately 144.92% compared with the previous year by showing $ 11.78 million CGT thanks to order recovery rate from the third quarter while bulk carriers and tankers are still the dominated.
    Korean order price maintained world No. 1, registering an increase of approximately 38% compared with the previous year by showing $ 30.6 billion more than 24 billion compared with China’s.
    The number of contracting in China is 914 ships and almost doubled compared to 458 ships in Korea. However, ship order is concentrated in low value product like bulk carriers, medium-sized tankers.

    (2) Deliveries
    The size of the deliveries in 2010 registered an increase of approximately 0.2% compared with the previous year by showing $ 15.51 million CGT. The exports especially registered an increase of approximately 10% by showing $ 49.8 billion, recording the largest performance ever.



    (3) Orderbook
    The size of the orderbook in 2010 declined 17.4% compared with the previous year by showing 45.54 million CGT due to slow order recovery rate compared to deliveries. That is work which is done in approximately 2 years in the future.
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