Biggest Shipyards May Keep High Prices to Counter Costs

Thursday, December 28, 2006
Bloomberg reported that Hyundai Heavy Industries Co. and other shipbuilding companies may succeed in keeping vessel prices at record highs for a third year as they seek to shield earnings against dropping orders and higher steel costs. The top-three yards, Hyundai Heavy, Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co., all from South Korea, will book new orders around today's all-time highs, according to four out of five analysts surveyed by Bloomberg. The companies will give their outlooks for 2007 as early as this week. South Korea's yards took almost half of this year's orders in the world's $100 billion ship industry, as transporters turned to them for the largest and most expensive vessels. With business set to fall from this year's peak, the builders want to avoid a repeat of 2004, when they didn't foresee a jump in the cost of steel plates used in hulls that wiped out two-thirds of profit. Liquefied-natural-gas tankers, the most complex and expensive type of ship, cost a record $220 million in early December compared with $205 million at the end of last year, according to London-based Clarkson Plc, the world's largest ship broker. A very large crude-oil carrier cost an all-time high of $129 million early this month, 7.5 percent more than a year ago. Daewoo Shipbuilding leads its competitors in contracts for both those types. The largest tankers are more than 300 meters (984 feet) long, equivalent to three football fields, or about the height of the Eiffel Tower. Source: Bloomberg
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