Korea Shipbuilding & Offshore "Heavy Plate Prices Expected to Soar Until Next Year... Profit Expected After Q3" (Update)

The sea trial of the world's first LNG-powered ultra-large container ship built by Hyundai Samho Heavy Industries. Photo by Korea Shipbuilding & Offshore Engineering

[Asia Economy Reporter Choi Dae-yeol] Korea Shipbuilding & Offshore Engineering (KSOE) expects the soaring prices of steel plates (thick steel plates over 6mm used in shipbuilding) to continue for about a year until the first half of next year for ships to be built in the future. This year, the company recorded a loss close to 900 billion KRW in the second quarter by reflecting a large provision for construction losses due to the sharp rise in steel plate prices.

On the 21st, a company official said during a conference call at the investor briefing, "POSCO has proposed 1.15 million KRW per ton, and we are negotiating, estimating the cost to be at least over 1 million KRW." He added, "Although the steel plate price has not been finalized, we expect it to maintain its peak until the first half of next year and then gradually decline. If there are no changes in price or exchange rates, we expect the commercial ship division to return to profitability."

According to the second-quarter earnings data disclosed by the company on the same day, the operating loss turned to 897.3 billion KRW. Shipbuilders set provisions for expected losses after reviewing order backlogs when steel plate price increases lead to changes in estimated costs. The company explained that if the increase in steel prices had not been reflected, a slight overall profit was expected, but due to a conservative approach, a large-scale loss was inevitable.

As of the first half of this year, the company has achieved about 90% of its order target, and including this month, it has met the annual target. The company stated that it will focus on securing orders for highly profitable projects in the second half of the year. A company official said, "Orders for large container ships are fully booked until the second quarter of 2024," adding, "Based on the stably secured volume, we plan to consider actual demand and profitability before placing new orders."

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