Buoyant Industry, but Analysts Worry about Acquisition Boom

Friday, September 05, 2008

Samsung Heavy Industries' overcrowded shipyard boasts about 40 months' worth of orders, yet analysts say that the seemingly buoyant shipbuilding industry may soon be heading into a multiyear downturn, and that bold efforts to buy up other shipbuilders - currently led by Hyundai Heavy Industries and STX Shipbuilding - could backfire in a costly way, IHT reported.  Analysts say that new ship orders are dwindling and shipbuilding shares have not yet hit bottom. The slowing global economy is hurting worldwide trade and rising steel prices are squeezing shipbuilders' profit margins.  Meanwhile, STX Group, the South Korean company that is the parent of STX Shipbuilding, is finalizing its buyout of Aker Yards, the biggest European ship maker. The deal cost STX $1.3 billion, including the latest $636 million tender offer.  New yards are under construction in and abroad, including shipyards in the owned by Hanjin Heavy Industries, but it is difficult and time-consuming to find a suitable site, negotiate investments and train workers as companies compete for orders that require a high level of technical expertise.
Source:  IHT

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