Hyundai, Samsung Boost Order Target on Offshore Demand

Hyundai Heavy Industries Co. (009540) and Samsung Heavy Industries Co., the world’s two biggest shipbuilders, forecast a jump in orders this year, helped by rising demand for offshore drilling and production units.

Hyundai Heavy is targeting annual orders for ships, offshore products and plant construction to surge 52 percent to $29.7 billion, according to a regulatory filing. Smaller rival Samsung Heavy aims to win orders worth $13 billion, 35 percent more than last year, its spokesman I Chan Hwang said.

The South Korean shipbuilders, who failed to meet their 2012 targets, are boosting the outlook as Petroleo Brasileiro SA, Exxon Mobil Corp. and other energy companies develop new fields amid dwindling oil reserves at existing wells. The increased exploration may spur spending of more than $335 billion by 2016, according to Canterbury, U.K.-based researcher Douglas-Westwood.

“Demand for offshore facilities, including drill ships and floating production units, will continue to increase this year,” Ko Jae Ho, chief executive officer of Daewoo Shipbuilding (042660) & Marine Engineering Co., said in a speech today. “Demand for vessels may recover in the second half.”

Daewoo Shipbuilding, the world’s third-largest, didn’t disclose its order target for this year. The Seoul-based company won $14.3 billion in contracts in 2012, exceeding its projection for $11 billion, it said in a Dec. 26 statement.

Slumping Demand

Hyundai Heavy and Samsung Heavy failed to meet their order targets last year as overcapacity and economic uncertainties caused demand to slump. Hyundai Heavy will “aggressively market” their products to secure more work, Chief Executive Officer Lee Jai Seong said in a speech to employees today.

Hyundai Heavy dropped as much as 0.6 percent to 247,000 won and traded at 248,000 won as of 12:59 p.m. in Seoul. Daewoo Shipbuilding advanced as much as 1.8 percent and Samsung Heavy fell as much as 1.3 percent.

Ulsan, South Korea-based Hyundai Heavy raised a record 1.2 trillion won in bond sales last year as it sought cash amid the slump in new orders. Securing funds will be a top priority for the company this year as well, the CEO said without elaboration. The shipbuilder received applications for early retirement from workers last year for the first time, and also reduced the number of its executives.

To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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