Korean construction firms and shipbuilder alike are facing a historic dearth in orders from overseas as they teeter on the brink of insolvency.

Overseas orders have been the mainstay of both industries, but now the global slump compounded by falling oil prices is threatening their very existence.

For example, Samsung Heavy Industries, one of Korea’s top three shipbuilders, has yet to win a single overseas order this year.

The last order was in October 2015 for four oil tankers from Malaysia’s AET for US$200 million. No such dearth has been seen since 2009.

A Samsung staffer said, “We are in talks about three or four projects and expect to win orders in the second half of this year. But industry conditions have got worse due to Brexit, so it won’t be easy to meet our targets.”

Shipbuilding

The situation is even worse for shipbuilders, which earn more than 90 percent of their revenues from overseas orders.

Hyundai Heavy Industries, Daewoo Shipbuilding and Marine Engineering and Samsung Heavy, the top three, have won only $1.9 billion worth of overseas orders in the first half of this year.

That is less than 1/25 of the $48.6 billion the three shipbuilders won in 2013, when orders came flooding in for offshore crude oil platforms.

But the shipbuilders soon found that they had taken on more than they could handle and in many cases lacked the expertise for jobs they had undercut the competition for, resulting in massive losses and bruised reputations.

The drought is likely to continue. Offshore oil platforms are usually in demand when international oil prices surpass $60 a barrel, and it is unlikely that they will rise fast enough.

The shipping industry is also seeing orders dry up due to Brexit and other global factors that have spooked markets.

At most companies, orders from European shipping firms account for the lion’s share, but one European firm is already showing signs of canceling orders.

An industry insider said, “If the shortage persists, docks will sit empty from the second half of next year. We urgently need to research new products and services and look for new clients.”

Source: Chosun