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The Star
04-08-2025
- Business
- The Star
High-value orders lift outlook for S. Korean shipbuilders
A liquefied natural gas carrier built by HD Korea Shipbuilding & Offshore Engineering Co SEOUL: South Korea's major shipbuilders – HD Hyundai Heavy Industries, Samsung Heavy Industries and Hanwha Ocean – are set to post stronger profit growth over the coming quarters, as high-margin gas carrier orders placed since 2023 begin to flow into their earnings. These liquefied natural gas (LNG), ammonia and liquefied petroleum gas carriers, typically priced more than 10% higher than earlier contracts, are expected to sharply boost shipyard profitability amid stabilising construction costs. HD Hyundai Heavy Industries is already seeing the impact. The shipbuilder last Thursday reported a 141% surge in operating profit to 471.5 billion won or about US$339mil for the April-June quarter, while revenue climbed 6.8% to 4.15 trillion won. Analysts at IBK Securities said the turnaround is being driven by LNG carriers ordered in 2023, which have started contributing to revenue. Currently, orders for gas carriers secured from 2023 account for 29% of HD Hyundai's sales – a figure expected to rise to 60% by year-end. The company's order backlog, 70% of which consists of gas carriers, covers about three years of production, suggesting elevated earnings will persist through at least 2026. Most of the high-value contracts have yet to be fully reflected in financials, as it typically takes two to three years for orders to be recognised. Samsung Heavy and Hanwha Ocean are on similar trajectories. Analysts expect their LNG carrier orders from 2023 to begin contributing to earnings late this year and early next year, respectively. Gas carriers account for more than 60% of both firms' backlogs. Prices for 174,000-cubic-m LNG carriers have continued to climb, reaching US$259mil in 2023 and US$263mil in 2024, up from US$232mil in 2022 and significantly above the US$210mil average seen in Qatar's bulk orders from 2022. Those Qatari deals still represent a sizeable portion of revenue – about 37% for HD Hyundai, 27% for Samsung Heavy and 24% for Hanwha Ocean. Analysts said input costs are not rising at the same pace, thanks in part to a more stable labour market. 'It has been over two years since foreign workers entered domestic shipyards on E-7 and E-9 visas. Their skills have improved, helping to stabilise labour costs,' said Oh Ji-hoon, an analyst at IBK Securities. Some analysts caution that rising ship prices alone may not guarantee wider margins, pointing to fluctuating steel pricing, a key input cost in shipbuilding. — The Korea Herald/ANN
Korea Herald
03-08-2025
- Business
- Korea Herald
High-value gas orders lift Korean shipbuilders' profit outlook
South Korea's major shipbuilders ― HD Hyundai Heavy Industries, Samsung Heavy Industries and Hanwha Ocean ― are set to post stronger profit growth over the coming quarters, as high-margin gas carrier orders placed since 2023 begin to flow into their earnings. These liquefied natural gas, ammonia and liquefied petroleum gas carriers, typically priced more than 10 percent higher than earlier contracts, are expected to sharply boost shipyard profitability amid stabilizing construction costs. HD Hyundai Heavy Industries is already seeing the impact. The shipbuilder on Thursday reported a 141 percent surge in operating profit to 471.5 billion won ($339 million) for the April-June quarter, while revenue climbed 6.8 percent to 4.15 trillion won. Analyst at IBK Securities and the turnaround was driven by LNG carriers ordered in 2023, which have started contributing to revenue. Currently, orders for gas carriers secured since 2023 account for 29 percent of HD Hyundai's sales ― a figure expected to rise to 60 percent by year-end. The company's order backlog, 70 percent of which consists of gas carriers, covers about three years of production, suggesting elevated earnings will persist through at least 2026. Most of the high-value contracts have yet to be fully reflected in financials, as it typically takes two to three years for orders to be recognized. Samsung Heavy and Hanwha Ocean are on similar trajectories. Analysts expect their LNG carrier orders from 2023 to begin contributing to earnings in late 2025 and early 2026, respectively. Gas carriers account for more than 60 percent of both firms' backlogs. Prices for 174,000-cubic-meter LNG carriers have continued to climb, reaching $259 million in 2023 and $263 million in 2024, up from $232 million in 2022 and significantly above the $210 million average seen in Qatar's bulk orders from 2022. Those Qatari deals still represent a sizable portion of revenue ― about 37 percent for HD Hyundai, 27 percent for Samsung Heavy and 24 percent for Hanwha Ocean. Analysts said input costs are not rising at the same pace, thanks in part to a more stable labor market. 'It has been over two years since foreign workers entered domestic shipyards on E-7 and E-9 visas. Their skills have improved, helping to stabilize labor costs,' said Oh Ji-hoon, an analyst at IBK Securities. Some analysts caution that rising ship prices alone may not guarantee wider margins, pointing to steel pricing, a key input cost in shipbuilding. Thick steel plates, heavily used in both ships and buildings, are particularly sensitive to trends in China's construction sector, which remains sluggish. Lower steel prices, while a headwind for steelmakers, could help support shipbuilders' profit margins as they work through their high-value gas carrier backlogs. 'Real estate investment in China fell 10.7 percent year-on-year between January and May, while new housing starts dropped 21 percent,' said one industry analyst. 'Unless there's a meaningful recovery in China's property market, demand for thick steel plates will likely stay weak. Even with recent steel production cuts, I don't expect a sharp rebound in prices.'
Korea Herald
08-04-2025
- Business
- Korea Herald
Tariff shock: Sidecar triggered as Kospi falls below 2,400
Foreign investors remain cautious, but stimulus hopes and easing tariff risks may spark recovery later this year, analysts say South Korean stocks slumped Monday as renewed US tariff threats rattled markets, triggering a rare trading halt to curb volatility. The benchmark Kospi plunged 5.57 percent to close at 2,328.2, its lowest finish since November 2023. The tech-heavy Kosdaq also slumped 5.25 percent to 651.3. Panic selling erupted from the opening bell, prompting a sidecar — a five-minute halt on program trading — at 9:12 a.m. on Kospi 200 futures. It was the first activation in eight months, but losses deepened through the session. Foreign investors led the exodus, dumping 2.1 trillion won ($1.43 billion) of Kospi shares and 187.2 billion won on the Kosdaq. Retail investors stepped in as dip buyers, scooping up 1.67 trillion won in Kospi and 167 billion won in Kosdaq stocks. The turmoil spilled into currency markets, with the Korean won tumbling 33.7 won to 1,467.8 per dollar — its biggest daily drop in five years. The won briefly touched 1,471.3 during intraday trading, sliding as much as 2.6 percent from Friday's close. The selloff came as fears of a global trade war escalated, after the US last week unveiled sweeping 'reciprocal tariffs,' including a 25 percent levy on South Korean imports. Tensions intensified further over the weekend, with China announcing retaliatory duties on US goods and President Donald Trump vowing to press ahead with the measures. Market turbulence is unlikely to ease soon, analysts said, with global recession risks and US tariff uncertainty set to keep volatility elevated. 'The market isn't operating on rational logic at this point, so typical valuation arguments may not carry much weight,' said Cho Jun-kee, analyst at SK Securities. 'Without a clean resolution in sight, fresh shocks could drive further declines, with any rebound likely to be limited." The hit is proving especially painful for Korea, whose export-driven economy has been struggling with weakening trade growth since last year. 'Korea's dependence on exports makes it particularly vulnerable, and steeper-than-expected tariffs will inevitably weigh on growth,' said Jeong Yong-taek, senior analyst at IBK Securities, who expected market weakness to persist at least through April. Estimates from the financial sector suggest the 'reciprocal tariffs' could trigger a roughly 13 percent drop in Korea's exports to the US, its second-largest trading partner after China. The US accounts for 18.7 percent of Korea's total exports. Still, analysts see limited room for further downside given already depressed valuations. The Kospi's price-to-book ratio has fallen to 0.87 — a level rarely seen outside of major crises like the 2008 global financial crash or the 2022 pandemic selloff. While the Kospi had been under pressure from worsening trade tensions and weak domestic demand since last year, sentiment took a decisive hit in December after former President Yoon Suk Yeol's failed attempt to impose martial law. The shock dragged the index below 2,400, leaving it stuck in the 2,400 to 2,700 range for months. The Constitutional Court's ruling last Friday to formally remove Yoon offered a brief reprieve. The Kospi initially rallied above 2,500 after the verdict, but gains quickly evaporated as focus shifted back to tariff risks. 'The market saw a meaningful correction last year, and current valuations are quite attractive for bargain hunters,' said Park Sang-hyun, a researcher at iM Securities. 'That should help limit further downside.' Yoon's ouster also clears the path for faster policy action after months of political paralysis, offering a boost to sentiment. An early presidential election has been tentatively set for June 3, with parties expected to roll out stimulus-heavy pledges in the weeks ahead. Reflecting the improving sentiment, NH Investment & Securities raised its Kospi target range from 2,380 to 2,850. 'The stock market will likely first price in relief seen in the currency market, followed by momentum from potential stimulus measures, such as a supplementary budget,' said Kim Byung-yeon, NH's chief strategist. No rush back for foreigners — yet Offshore investors — a key driver of Korea's markets — are unlikely to rush back in soon, with the won still weak and global volatility elevated. Foreign traders have sold Korean equities for eight straight months, dumping nearly 13 trillion won so far this year. 'Foreign inflows will likely stay subdued in the near term,' said Jeong. 'Rising global volatility is driving demand for safe-haven assets, making it harder for foreigners to commit to Korean stocks.' The won has come under heavy pressure in recent months, trading above 1,400 per dollar — well above last year's average of around 1,360. Some even warn it could test the 1,500 level if external risks persist. Yet, the resolution of key uncertainties may offer some room for the won's near-term stability, a potential catalyst for the stock market. 'The won has been an outlier in the broader dollar-weakening cycle globally, weighed down by trade risks, capital outflows and political uncertainty,' said Kim. 'But it could settle in the low-1,400 range later this year.' Once trade tensions ease and the new administration rolls out its policy agenda, foreign inflows could pick up in the second half, analysts said. 'We think tariff-related uncertainty has largely peaked, with Trump having already rolled out most of his flagged policies,' said Park. 'For Korea, stronger policy support under the new administration could pave the way for improved foreign fund flows.'
Korea Herald
07-04-2025
- Business
- Korea Herald
Tariff shock: Kospi falls below 2,400 as sidecar triggered on futures
Foreign investors remain cautious, but stimulus hopes and easing tariff risks may spark recovery later this year, analysts say South Korean stocks slumped Monday as renewed US tariff threats rattled markets, triggering a rare trading halt to curb volatility. The benchmark Kospi plunged as much as 5 percent at the open, sliding below 2,400 and briefly touching an intraday low of 2,327. The sharp drop prompted Korea Exchange to impose a sidecar on Kospi 200 futures at 9:12 a.m., halting program trading for five minutes after contracts tumbled 5.2 percent — the first sidecar activation in eight months. By 1:30 p.m., the Kospi was hovering around 2,340, down 5.08 percent. Foreign investors led the selloff, offloading 1.5 trillion won ($1 billion) in shares, while institutions shed 154 billion won. Retail investors stepped in as buyers, picking up a net 1.52 trillion won. Amid heightened volatility, the Korean won weakened sharply, sliding about 2 percent from Friday's close to 1,434 per dollar. The market rout came amid mounting fears of a global trade war after the US last week unveiled a sweeping set of 'reciprocal tariffs,' including a 25 percent levy on South Korean imports. Global jitters intensified over the weekend, with China announcing retaliatory tariffs on US goods and US President Donald Trump doubling down on plans to press ahead with the measures. Market turbulence is unlikely to ease soon, analysts said, with global recession risks and US tariff uncertainty set to keep volatility elevated. 'The market isn't operating on rational logic at this point, so typical valuation arguments may not carry much weight,' said Cho Jun-kee, analyst at SK Securities. 'Without a clean resolution in sight, fresh shocks could drive further declines — and even if a rebound comes, the upside will likely be limited.' The hit is proving especially painful for Korea, whose export-driven economy has been struggling with weakening trade growth since last year. 'Korea's dependence on exports makes it particularly vulnerable, and steeper-than-expected tariffs will inevitably weigh on growth,' said Jeong Yong-taek, senior analyst at IBK Securities. He expects market weakness to persist at least through April. Korean stocks followed steep losses on Wall Street last week, as investors braced for blows from the harder-than-expected US tariffs on the global economy. The S&P 500 slumped 10.6 percent over the past two sessions, while the Nasdaq fell 5.8 percent, leaving them 17 percent and 23 percent below their 2025 highs. Still, analysts see limited room for further downside given already depressed valuations. The Kospi's price-to-book ratio has fallen to 0.87 — a level rarely seen outside of major crises like the 2008 global financial crash or the 2022 pandemic selloff. While the Kospi had been under pressure from worsening trade tensions and weak domestic demand since last year, sentiment took a decisive hit in December after former President Yoon Suk Yeol's failed attempt to impose martial law. The shock dragged the index below 2,400, leaving it stuck in the 2,400 to 2,700 range for months. The Constitutional Court's ruling last Friday to formally remove Yoon offered a brief reprieve. The Kospi initially rallied above 2,500 after the verdict, but gains quickly evaporated as focus shifted back to tariff risks. 'The market saw a meaningful correction last year, and current valuations are quite attractive for bargain hunters,' said Park Sang-hyun, a researcher at iM Securities. 'That should help limit further downside.' Yoon's ouster also clears the path for faster policy action after months of political paralysis, offering a boost to sentiment. An early presidential election has been tentatively set for June 3, with the cabinet slated to confirm the date on Tuesday. In the meantime, parties are expected to unveil stimulus-heavy pledges in the weeks ahead. Reflecting the improving sentiment, NH Investment & Securities raised its Kospi target range from 2,380 to 2,850. 'The stock market will likely first price in relief seen in the currency market, followed by momentum from potential stimulus measures, such as a supplementary budget,' said Kim Byung-yeon, NH's chief strategist. No rush back for foreigners — yet Offshore investors — a key driver of Korea's markets — are unlikely to rush back in soon, with the won still weak and global volatility elevated. Foreigners have sold Korean equities for eight straight months, dumping 10.6 trillion won so far this year. 'Foreign inflows will likely stay subdued in the near term,' said Jeong. 'Rising global volatility is driving demand for safe-haven assets, making it harder for foreigners to commit to Korean stocks.' The won has come under heavy pressure in recent months, trading above 1,400 per dollar — well above last year's average of around 1,360. Some even warn it could test the 1,500 level if external risks persist. Yet, the resolution of key uncertainties may offer some room for the won's near-term stability, a potential catalyst for the stock market. 'The won has been an outlier in the broader dollar-weakening cycle globally, weighed down by trade risks, capital outflows and political uncertainty,' said Kim. 'But it could settle in the low-1,400 range later this year.' Once trade tensions ease and the new administration rolls out its policy agenda, foreign inflows could pick up in the second half, analysts said. 'We think tariff-related uncertainty has largely peaked, with Trump having already rolled out most of his flagged policies,' said Park. 'For Korea, stronger policy support under the new administration could pave the way for improved foreign fund flows.'
