Will Joseon Stocks with Wings Sail Smoothly Again This Year?

Relay Orders Boost Stock Price...Concerns Over Profitability Deterioration Amid Continued Boom Outlook

▲Oil tanker built by a domestic shipyard

[Asia Economy Reporter Park Jihwan] Attention is focused on whether domestic shipbuilders, who succeeded in relay orders at the end of last year, will continue their upward trend this year. Most market forecasts predict a boom in the ship order market until the first half of this year. However, some are concerned about profitability deterioration due to falling ship prices.

According to the shipbuilding industry on the 5th, the four major domestic shipbuilders?Samsung Heavy Industries, Korea Shipbuilding & Offshore Engineering, Daewoo Shipbuilding & Marine Engineering, and Hyundai Mipo Dockyard?have recorded orders worth a total of $11.4 billion (12.5 trillion KRW) since November last year. This accounts for 54% of last year's total annual orders of $21 billion.

As the workload increased, stock prices also soared. Looking at the stock price trends from November last year to the 4th of this month, Hyundai Mipo Dockyard surged 72.3%. Samsung Heavy Industries, Korea Shipbuilding & Offshore Engineering, and Daewoo Shipbuilding & Marine Engineering also rose by 44.6%, 40.3%, and 30.4%, respectively.

The outlook is that the shipbuilding industry's order news will continue next year. First, 17 Mozambique LNG carriers and Qatar LNG ship contracts postponed to next year are scheduled. Recently, the order environment has become favorable due to the decline in exchange rates and the rise in oil prices. In the global shipbuilding market, the weaker the dollar, the more domestic shipyards increase ship orders. The rise in oil prices increases demand for liquefied natural gas (LNG), which in turn increases LNG ship orders. Additionally, with growing expectations for economic recovery from COVID-19, postponed orders are expected to continue. Lee Dongheon, a researcher at Daishin Securities, said, "Order conditions have improved due to oil price recovery, economic reopening expectations following COVID-19 vaccines, and the won's strength," adding, "Positive order trends are expected to continue until the first half of the year."

However, the decline in ship prices is pointed out as a variable. According to Clarkson, a British shipping research institute, the new ship price index has fallen by 3.2% over the past year, and the won-denominated ship price, considering exchange rates, has dropped by 8.2%. Despite explosive orders in the fourth quarter of last year, ship prices remained stagnant, which is analyzed as a bargain sale by shipbuilders who had paused for three quarters due to COVID-19 to fill their volume. Jung Dongik, a researcher at KB Securities, pointed out, "Despite the recent increase in orders, ship prices have continued to fall," adding, "It can be seen that domestic shipbuilders have engaged in low-price orders due to a shortage of order backlog, which could boomerang as a deterioration in profitability."

This content was produced with the assistance of AI translation services.