Report: HHI’s Survival Put to Question If Order Shortage Persists
Despite a surge in orders at South Korean shipyards in September which enabled them to overpower their Chinese counterparts, Hyundai Heavy Industries (HHI) seems to be suffering from acute lack of orders.
According to HHI’s Vice Chairman Oh-Gap Kwon, cited by local media, the company managed to score orders for 30 vessels this year, which is only a third of the expected orders for over 100 ships.
Speaking on Thursday at a review carried out by South Korea’s National Assembly, Kwon said that if orders don’t increase, the company might be forced to shut down operations at all its yards in the next eight months.
Namely, the company’s order backlog comprises 75 ships which can be completed in eight months.
Furthermore, newbuilding prices have been halved exerting further pressure on earnings for shipyards.
Kwon added that the lack of ordering is also the reason why reopening of the Gunsan yard cannot take place, as such step would bring losses worth KRW 100 bn (USD 88.2 million) to the company.
Hyundai Heavy Industries closed temporarily its Gunsan dockyard in July this year due to a lack of shipbuilding orders.
In March 2017, HHI informed that it was looking to close another one of its dry docks at the Ulsan shipyard, the 380-meter-long Dock 5, which has a capacity to roll out 400,000 tons a year. The dock closure follows Hyundai Heavy’s decision to shut down the ops at its Dock 4 in June 2016.
In addition, shortage of orders resulted in HHI’s introduction of leave rotation scheme for workers in September.
The five-week program rotation would help resolve the issue of the idle workforce, HHI said, enabling the employees to keep their jobs.
Wage cuts have also been among the measures implemented by the shipbuilder so as to cut costs and help improve the company’s liquidity.
According to Kwon, he has not been paid for four years now.
Last month, HHI finally secured a major order. Specifically, compatriot Polaris Shipping placed an order for ten very large ore carriers (VLOCs) of 325,000 DWT, worth USD 800 million.
The delivery is slated for April 2021, HHI said in a regulatory filing.
The contract is the largest single order for Hyundai in the last five years.
World Maritime News Staff