The combined operating profit of the domestic "big three" shipbuilders (HD Korea Shipbuilding & Offshore Engineering, Hanwha Ocean, Samsung Heavy Industries) is expected to top 1.5 trillion won in the third quarter this year. Samsung Heavy Industries and Hanwha Ocean will release results on Oct. 23 and Oct. 27, and HD Korea Shipbuilding & Offshore Engineering will announce in the last week of the month.
The big three's combined operating profit outlook for the third quarter is 1.5157 trillion won. According to FnGuide, HD Korea Shipbuilding & Offshore Engineering's third-quarter operating profit is projected at 944.1 billion won, and Hanwha Ocean and Samsung Heavy Industries at 356.2 billion won and 215.4 billion won, respectively. Compared with the combined operating profit of 543.9 billion won in the third quarter last year, that would be nearly tripled.
In the first half of this year, the combined operating profit of HD Korea Shipbuilding & Offshore Engineering, Hanwha Ocean and Samsung Heavy Industries reached 2.772 trillion won, already surpassing last year's full-year combined operating profit of 2.1747 trillion won.
The improvement in results was largely due to orders centered on liquefied natural gas (LNG) carriers, which are about 1.5 to 2 times more expensive than container ships. As of the second quarter, LNG carriers accounted for 70% of total sales at HD Hyundai Heavy Industries. Hanwha Ocean was also in the 60% range.
With a selective order strategy, HD Korea Shipbuilding & Offshore Engineering lifted its second-quarter operating margin to 12.9%. The operating margin of Hanwha Ocean's commercial ship business was 13.4%, and Samsung Heavy Industries came in at 7.6%.
A recent slowdown in ship orders is a concern. Some observers predict the shipbuilding industry has entered a "peak-out" phase (decline after a peak). From January to August this year, Korea's cumulative ship orders totaled 5.91 million CGT (compensated gross tonnage, a weight unit that reflects value added and work difficulty), down 29.1% from the same period a year earlier (8.34 million CGT).
The shipbuilding industry expects new orders for LNG carriers to increase if large-scale LNG projects move forward in North America and the Middle East. An industry official said, "If environmental regulations in the shipping industry tighten, demand will grow for eco-friendly vessels where Korean shipbuilders have strengths. In addition, as the U.S. government implements policies to keep Chinese shipbuilding in check, Korean shipbuilders are expected to benefit as a side effect."