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Hyundai Heavy Sets Shipbuilding Trend
Korean shipbuilders have gained worldwide attention for their technological prowess and role in setting new business trends.

They now dominate about 40 percent of the global market, with their shipyards full for the next few years due to growing orders.

With the world economy turning up, ship owners have felt pressure to increase investment in shipbuilding due to the increasing quantity of containers transported, especially to and from China, the reinforced environmental regulations on ships and the rising demand for liquefied natural gas (LNG) as a clean fuel.

Armed with the world¡¯s most advanced technologies, Hyundai Heavy Industries, the world¡¯s No.1 shipbuilder, has read the trend well.

Due to the current stable backlog, the company has lowered its target for new orders in 2005 by 35 percent from 2004, to $5.5 billion. Instead, it has focused on securing profitability with such high value-added ships as large-size containerships and LNG carriers.

``One of our key concerns now is making the company respond to rapid changes effectively by shaping its marketing strategies to take advantage of new trends,¡¯¡¯ the firm¡¯s CEO and president Yu Kwan-hong said.

Despite rising prices of steel and other raw materials and an intensifying challenge from global competitors, Hyundai Heavy¡¯s future looks brighter than ever.

Due to the boom in the shipbuilding market, the firm received new orders in 2004 for 104 ships or 6.9 million gross tons, amounting to $8.5 billion.

This total easily outpaced the $6.8 billion of 2003, a record high at that time, and completely overshot its target for new orders by 189 percent.

This outstanding performance was made possible by the increase in demand due to the recovering world economy and further economic growth in China. Additionally, Hyundai Heavy used its strong competitiveness to its advantage, while focusing energy and resources on upgrading ship quality and customer service.

``There is a trend for global shipping firms to operate large-sized containers to meet growing trade by ships,¡¯¡¯ Yu said. ``We are developing technologies to build larger containers, which can carry more than 12,000 TEUs of cargo.¡¯¡¯

In March, the Korea Shipbuilders¡¯ Association (KSA) said in a report that the growth outlook for Korean shipbuilders will remain bright for at least 10 years due to growing global demand for new vessels.

In particular, Korean shipbuilders will see a boom for large-sized container ships and LNG carriers, which are more profitable than other type of ship, the report said.

Hyundai Heavy and Daewoo Shipbuilding and Marine Engineering, the second largest shipbuilder in the world, are winning an increasing number of orders for large container ships.

The two and other Korean shipbuilders are expected to control about 60 percent of the market for container ships and 65 percent for LNG tankers by 2015, according to industry watchers.

The overall shipbuilding market moves in accordance with international trade conditions and is affected by fluctuations in the shipping industry. Competition from local and Japanese shipbuilders has become more intense, and the Chinese and other newcomers, while taking advantage of low wages, have increased production capacity and expanded share on the global market

This is obviously a huge pressure for Hyundai Heavy, but its control on the shipbuilding market will not be affected, according to Yu.

The company has wowed the shipbuilding world by developing new technologies that may set the trend of vessel manufacturing for the next decade.

With the technologies, it won a contract to build the world¡¯s largest container ship from China¡¯s Cosco Asia in January.

Cosco placed orders for four 10,000-TEU ships. Each ship is 349 meters long, 45.6 meters wide and 27.2 meters deep, the largest of their kind, Hyundai Heavy said.

The firm has also successfully conducted a test run for a 105,000-ton crude oil carrier that was built on ground instead of in a dry dock, a revolutionary method that gained an overwhelming world response.

``We¡¯ve rewritten the history of shipbuilding by succeeding with this new method, which will lead to a new trend in the business,¡¯¡¯ a Hyundai Heavy official said. ``The success will mark a turnaround in our shipbuilding business. It will also enable us to respond to increasing orders more flexibly.¡¯¡¯

In addition, the firm is keeping expanding investment in developing key technologies that can support its stable growth.

In just 26 years since the production of its first marine diesel engine, the firm achieved an aggregate of 50 million horsepower in a 2-stroke engine earlier this month for the first time in the world.

The test run for the 77,600 horsepower 2-stroke engine, which marked the 50-million horsepower milestone, has been successfully conducted, the firm said.

According to KSA, Korea¡¯s annual shipbuilding output will grow to 16.7 million tons in 2015 from 15.14 million tons last year. Its share of the global market is forecast to jump to 40.13 percent in 2015 from 38.5 percent last year.

The association forecast global demand for new ships will grow to 38.8 million tons this year from 37.2 million tons last year. The market may increase at an annual rate of 1.7 percent to reach 41.6 million tons in 2015, the KSA said.