South Korea’s shipbuilding industry is experiencing a resurgence, with companies like HD Korea Shipbuilding & Offshore Engineering and Samsung Heavy Industries reporting significant performance improvements. This “super cycle” is being driven by a confluence of factors, including growing demand for eco-friendly vessels and shifting geopolitical dynamics. While global economic uncertainties persist, the shipbuilding sector is emerging as a surprising beneficiary of U.S. policies related to the U.S.-China trade conflict, raising expectations for continued growth.
HD Hyundai Heavy Industries reported a remarkable 1,936% year-on-year increase in operating profit for the first quarter of this year, reaching 433.7 billion won. Sales also climbed by 27.9% to 3.822 trillion won, both figures exceeding market projections. This surge in profitability is partly attributed to favorable exchange rate effects; a 3% rise in the exchange rate translates to a roughly 67.5 billion won increase in the company’s net income.
HD Korea Shipbuilding & Offshore Engineering also announced impressive first-quarter results, with sales up 22.8% to 6.771 trillion won and operating profit soaring by 436.3% to 859.2 billion won. The company has now achieved eight consecutive profitable quarters since the second quarter of 2022. This sustained growth is attributed to “improved productivity, increased construction volume, expanded sales proportion of high-priced ships, and improved profitability through selective orders,” according to a company spokesperson.
Samsung Heavy Industries saw a 58% rise in operating profit to 123.1 billion won, alongside a 6% increase in sales to 2.348 trillion won. A company representative noted, “With the full-scale production of FLNG facilities this year, sales and operating profit are expected to show an upward trend each quarter.”
This positive momentum is reflected in the stock market. HD Hyundai Heavy Industries and HD Hyundai Mipo both reached new 52-week highs, with HD Hyundai Heavy Industries closing at 376,000 won on April 24, a 2.45% increase. Foreign investors have shown strong interest in the sector, actively purchasing shares in companies like HD Korea Shipbuilding & Offshore Engineering and Samsung Heavy Industries.
The current shipbuilding boom is fueled by increasing demand for eco-friendly vessels like LNG dual-fuel carriers, driven by stricter environmental regulations and technological advancements. Furthermore, escalating U.S.-China trade tensions have led the U.S. to seek closer economic ties with allies like South Korea. Former President Trump’s expressed intention to order advanced ships from allied nations further strengthens this trend.
Kang Kyung-tae of Korea Investment & Securities noted the potential benefits for Korean shipbuilders: “Nearly 100 LNG carriers need to be constructed annually using the supply chain in the U.S., but they have no choice but to rely on Korea’s LNG carrier construction system.” This presents a significant opportunity for all major domestic shipbuilders.
As South Korean shipbuilders capitalize on these favorable market conditions and navigate the evolving geopolitical landscape, their outlook remains positive.
Source: Business Korea