17-06-2016

Korea’s shipbuilding industry likely to remain sluggish in H2

shipbuilding

South Korea’s shipbuilding industry is likely to remain sluggish while auto, electronics and steel industries are unlikely to make a recovery in the second half of this year, experts said Thursday.

They said local shipbuilders are likely to suffer a lack of fresh orders, a move that could put further strain on embattled shipyards.

They made the predictions on the country’s major industries in a seminar organized by the Federation of Korean Industries that speaks for the country’s large businesses.

The country’s top three shipyards — Hyundai Heavy Industries Co., Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co. — suffered a combined operating loss of 8.5 trillion won last year due largely to increased costs stemming from a delay in the construction of offshore facilities and an industry-wide slump.

Under a combined 10.35 billion self-rescue programs approved by creditor banks, the three shipbuilders are carrying out strict restructuring measures by cutting jobs and selling assets to put their businesses back on track.

They are scheduled to complete all the restructuring moves in the next two and a half years to receive financial aid from their creditor banks and continue their operations.

Chae Hee-geun, an auto industry analyst at Hyundai Securities, said the domestic demand for cars may shrink in the second half before making a gradual recovery, citing the planned termination of an individual consumption tax cut later this month.

He also said he expects the demand of cars to go up in China, the world’s largest market, due to a tax cut and release of new cars.

Kim Ji-san, an analyst at Kiwoom Securities, said profitability of electronics companies could improve due to reductions of raw materials and marketing costs, though their sales are likely to remain sluggish.

Meanwhile, Park Sung-bong, an analyst with Hana Financial Investment said steel prices in China could rebound from June on improved steel demand in the world’s largest consumer of steel.

Lim Sang-hyuk, a senior FKI official, however, said economic growth in the second half will not be easy due to ongoing restructurings of companies.

Source: Yonhap

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