05-07-2017

Analysts divided over shipbuilders’ further rebound

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Stocks of South Korean shipyards, led by Hyundai Heavy Industries Co., suffered losses in the past few weeks due to a fall in global oil prices, with analysts remaining divided Tuesday on whether they will build up further gains down the road on the back of a recovery in the sector.

Hyundai Heavy traded at 175,000 won (US$152) on the Seoul bourse as of 10:20 a.m., unchanged from the previous session’s close, but the quotation marks a drop from its yearly high of 187,500 won.

Samsung Heavy Industries Co., another major shipyard here, has gained some 15 percent in the past three months. The shipyard traded at 12,700 won on the Seoul bourse, after hitting a 52-week high of 13,800 won in mid-June.

Hyundai Mipo Dockyard Co., a unit of Hyundai Heavy, has gained the most rising some 22 percent over the cited period. The company traded at 112,000 won, a drop from its yearly high of 121,000 won.

“The issue of an oil supply glut may be addressed in 2025, and South Korean shipbuilders are positioned to benefit from a rise in demand for oil products because they have an edge in building tankers,” said Park Moo-hyun, an analyst at Hana Financial Investment.

Earlier data showed that local shipyards are estimated to have clinched a third of new shipbuilding orders in the first half of the year, with their combined tally more than doubling from a year earlier.

Hyundai Heavy and other local shipyards have bagged orders worth a combined 2.56 million compensated gross tons (CGTs) in the January-June period, accounting for 34 percent of the total orders placed around the globe, according to the data compiled by industry tracker Clarkson Research.

It marked the first time since 2012 that South Korea was in the top slot in terms of new orders.

The new orders mostly centered around oil tankers and LNG carriers.

Lee Bong-jin, an analyst at Hanwha Investment & Securities, said that local shipyards may stage a rally on the hopes for a recovery in the global shipbuilding segment, but the increase in new orders were mainly due to a base effect.

“Rather than a recovery in new orders, it would be more correct to attribute it to a base effect,” Lee said. The analyst said the accumulated orders in the first five months of the year are 63 percent off the average seen between 2011 and 2015.

“The sticky issue is that a surge in global trade is unlikely without a jump in oil prices,” he said.

Source: Yonhap

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