South Korean shipbuilding shares down on order cancellations
Shares in South Korean shipbuilders extended their losses on Tuesday after the cancellation of a ship order this year prompted concerns among investors that Europe's debt crisis could see more orders being deferred and stopped, Reuters reports. Daewoo Shipbuilding & Marine Engineering said late on Friday that a 589.3 billion Korean won ($513.80 million) ship order was cancelled, the first for a major South Korean shipyard this year. Privately-owned Greek ship owner Gulf Marine Management SA called off two very large crude carrier (VLCC) oil tankers and two bulk carriers it ordered from South Korea's second-biggest shipbuilder at the height of the shipping boom in 2008 because it failed to make a second payment, said a source who has direct knowledge of the matter said on Tuesday. "There is little catalyst for the ship sector for the time being," KJ Hwang, an analyst at RBS, said. "Should the European debt crisis get worse, the risk of falls in ship prices, the deferral of payments and the delay and cancellation of orders and will be prolonged," he said. Hwang said ship operators may opt to cancel orders and place new orders, as prices of some ships are expected to fall below the levels seen during the 2008-2009 global financial crisis. The shipbuilding sector has been hit hard by Europe's fiscal woes and lending squeeze, as ship owners there rely on long-term borrowing for the funds to buy new vessels. South Korea, which is vying with China to be the world's top shipbuilding nation, is home to leading shipyards including Daewoo and Hyundai Heavy Industries. A glut of ships ordered when times were good have continued to hit the water this year while demand for the goods they carry has fallen as a result of a cooling global economy. The Seoul stock market's shipbuilding subindex had lost 3.38 percent on Tuesday, underperforming the overall market's 1.88 percent fall. The index has slumped 37 percent this year versus a 9 percent drop in the wider market.