Latest news with #OhJi-hoon
The Star
5 days ago
- 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
7 days ago
- 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.'
