Oil price rebound offers positive outlook for Korean shipbuilders

By Curious

The recent rebound in international oil prices is brightening the business outlook for South Korea’s shipbuilding industry, which posted its worst performance last year.

Crude prices, which have plummeted 70 percent since June 2014, rose to around $38 per barrel on Friday, the highest in three months, as optimism returned.

Oil price rebound offers positive outlook for Korean shipbuilders

The Paris-based International Energy Agency said Friday that oil prices “may have bottomed out,” citing that Iran’s return to oil production has had a less dramatic impact on the market and production declines in the U.S. and other non-OPEC producers accelerate.

Earlier this month, Reuters also reported major OPEC producers were privately starting to talk about a new oil price of $50 a barrel. Industry experts said the latest upward move in oil prices is positive for the Korean shipbuilding industry, which posted record losses last year as oil producers canceled or delayed orders for offshore rigs.

“The uptick in oil prices is expected to bring some offshore plant orders to the shipbuilders next year and will eventually lead to meaningful performances in 2018,” said Choi Kwang-sik, an analyst from HI Investment & Securities, predicting oil prices will rise to $50 per barrel next year.

CEO Jung Sung-leep of Daewoo Shipbuilding & Marine Engineering, shared a similar view, saying, “Since many believe oil prices will rise to $50 to $60 per barrel, we expect to see stability in business from the second half of next year” at the press briefing on Thursday.

The stock prices of the nation’s top three shipbuilders — Samsung Heavy Industries, Hyundai Heavy Industries and DSME — have all risen by more than 10 percent this month in the hope of oil price rebounds along with lifted sanctions on Iran.

The three posted combined losses of 7 trillion won ($5.8 billion) in their offshore plant business last year as international oil companies have cut orders amid the prolonged low oil price and global recession.

Some industry experts, however, are not overly optimistic about oil price rebounds. Investment banking company Goldman Sachs still remained bearish, saying the oil price rally is “premature” and prices could fall sharply in coming weeks.

Source: The Korea Herald