Hyundai Heavy Industries Co. received a $700 million order to build 10 ships for Iran’s state-owned shipping company in a deal that signifies the Middle Eastern country’s return to the international market after a decade.
The deal is part of plans by Islamic Republic of Iran Shipping Lines and Iranian Offshore Oil Co., a subsidiary of state oil company National Iranian Oil Co., to spend a total of up to $2.5 billion to modernize their fleets.
Iranian shipping companies haven’t modernized their fleets since 2006, when the United Nations imposed wide-ranging sanctions against Tehran over its uranium-enrichment program. The sanctions began to be gradually lifted in January.
“This marks Iran’s first ship order since international sanctions were lifted early this year. Hyundai plans to provide technical support for Iran to run its shipyards as well,” the South Korean company said Sunday.
Separately, Hyundai Heavy, the world’s largest shipbuilder by revenue, said it has also signed a $600 million deal to build two ships, including a submarine, for the South Korean government.
The two deals valued at a combined $1.3 billion—its largest order this year—are a welcome respite for Hyundai and other shipbuilders suffering from a virtual halt of new orders as shipping is trying to cope with glut of tonnage in the water estimated at 30% above demand.
South Korean shipbuilders have been selling noncore assets and slashing thousands of jobs to cope with the shrinking orders. South Korea is home to the world’s three largest shipbuilders—Hyundai Heavy, Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co.
The Iranian order involves four mega-container vessels capable of moving 14,500 containers each and six tankers for petroleum products. The first deliveries are expected in the second quarter of 2018.
Islamic Republic of Iran Shipping Lines, or IRISL, operates about 115 oceangoing vessels, but many of the ships are old and have been deemed unsafe to travel and can’t be insured.
As Iran moves to build modern fleets, its companies have been chartering vessels from Greek and other owners to build market share in container and tanker cargoes.
IRISL hopes the latest container order will give it the necessary capacity to eventually join one of three major shipping alliances that move the vast majority of global containerized cargo, company officials have said.
Annual seaborne trade between Iran and the European Union amounted to $15 billion before the first broad, international sanctions were imposed on the country in 2008. Tehran expects to return to that level by 2020.
Source: Wall Street JournalPrevious Next