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Increasing Orders Put South Korea Ahead Of The Competition

The South Korean shipbuilding industry may overtake, in terms of orders, its Japanese rival by the end of this year, Kentaro Aikawa, the newly-appointed chairman of the Shipbuilders Association of Japan, has warned.

Mr. Aikawa, chairman of Mitsubishi Heavy Industries (MHI), said, "Judging from the receipts of new shipbuilding orders in the first half of 1997, South Korean shipbuilders could overtake Japan by the end of the year. If so, this would be for the first time in four years." Japan received orders for the construction of 155 ships, totaling 5.6 million grt, in the January/June period, while South Korea received 92 vessel orders, totaling 5.27 million grt, a near three-fold rise over the same 1996 period. Meanwhile, Japanese shipbuilders received overseas orders for the construction of 39 ships, totaling 1.77 million grt in July, a 172 percent rise over the same period during last year, which included orders for the construction of 20 vessels for export totaling 652,370 grt. The main reason behind this increase is the orders for three VLCCs. Of the leading Japanese shipbuilders, Ishikawajima Harima Heavy Industries (IHI) has among the largest orderbooks for VLCCs, including a total of nine ordered this year. By comparison, Mitsubishi Heavy Industries (MHI) has a total of four VLCCs on its orderbooks and Hitachi Zosen has eight.

IHI is now confident that its shipbuilding division will return to profitability in the current financial period (and for the first time in two years), buoyed by this VLCC orderbook. IHI's shipbuilding division posted a $43.6 million operating loss for FY95, compounded by a Y2.2 billion loss the following year. Hitachi Zosen has launched Challenge 99, a management plan to grow the company's annual earnings to more than $8.6 billion by the end of 2005. The plan will focus on environmental energy, electronics and information system projects, which together share 50 percent of total company revenue. Chairman Yoshihiro Fujii said the company was considering entering the environment and energy markets in Taiwan, China and South Korea this year. Three of Japan's largest shipbuilders are to join forces to develop a sophisticated computer integrated manufacture system, designed to replace veteran shipyard foremen when they retire.

Mitsubishi Heavy Industries (MHI), Mitsui Engineering & Shipbuilding (MES) and Sumitomo Heavy Industries (SHI) are to spend Y l . l billion over three years to develop the system, designed to aid management and supervisory roles in every aspect of shipbuilding. Kawasaki Heavy Industries (KHI) has received an order for two LPG carriers of 84,000 cu. m. from Sonatrach Petroleum of the Virgin Islands. Sonatrach Petroleum, which is a wholly owned subsidiary of Enterprise National Sonatrach, is engaged in a crude oil development project in Algeria.

The first of the two LPG carriers is scheduled for delivery in the first quarter of 1999, with the second to follow in the second quarter of 2000. Nippon Yusen Kaisha (NYK) Line has placed an order with Mitsui Engineering & Shipbuilding (MES) for the construction of two 75,000-dwt Panamax bulk carriers as part of the tramp fleet modernization program. The first is scheduled for deployment in the middle of 1999 and the second in the autumn of the same year. When they are completed, they will join the fleet of large-sized tramp carriers. Namura Shipbuilding has signed a letter of intent with Sweden's Stena Bulk for the construction of four 107,000-dwt double hull Aframax tankers. Deliveries are set to begin in December 1999. The contract has been valued at $184 million. Japanese robot maker Orii Corp. recently announced that Namura Shipbuilding is to become its largest shareholder with a 30.7 percent share. Namura has purchased stock previously held by Orii chairman Masaru Orii. Sumitomo Heavy Industries (SHI) has redesignated its Oppama facility as Yokosuka Shipyard, where the company's newbuilding activities are concentrated. The company's nearby Uraga Shipyard, which had been operated by Uraga Heavy Industries until 1969, celebrates its centenary this year. Uraga's docks are today used solely for ship repair work. Further consolidation of the diesel engineering sector has been signaled by a new alliance between Finnish owned Wartsila NSD Corp. and Japan's Hitachi Zosen. A 50/50 joint venture production firm, Wartsila Diesel Japan Co. is to be created in Japan to assemble two of the most recently developed, medium speed designs in the Finnish engineered range.

Due to start in September, it will also sell other types of Wartsila machinery and propulsion packages into the home market, the world's largest shipbuilding market. Although it has come close to attracting ferry contracts in the past, South Korea's Samsung Heavy Industries (SHI) is poised to achieve its breakthrough in the RoRo freight vessel market. The South Korean yard is at an advanced stage of negotiations with an Australian operator regarding a requirement for two newbuildings of around 7,000 dwt. The subject design would probably offer a lane capacity in the region of 1,500 to 1,700 running meters. Market sources suggest that the prospective contractual party is Melbourne-based Brambles Shipping and that an order could be sealed before the end of this month. Hyundai Mipo Dockyard (HMD), one of the world's largest ship repair companies, saw its interim profits fall by 40 percent to $1.4 million due to a decrease in ship repair prices.




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