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Shipbuilders See Rising Costs

      5/26/2003

Happy days may be over for the Korean shipbuilding sector, which has had a very prosperous first quarter with a flood of orders, as the prices of raw materials are climbing dangerously. It is felt that Korean and Japanese steel makers are looking to raise their shipbuilding material prices in accordance with market conditions. Japanese steel companies said they would push up per-ton plate cost by between $20 and $30. The price rise is expected to greatly reduce shipbuilders' profitability. Despite many new orders received recently, the Korean industry has been concerned about slow recovery in profitability, as the ships' price increase have been relatively modest.

Japanese plates, which make up 10 percent to 30 percent of demand in the Korean shipbuilding sector, used to be cheaper than the locally produced goods, but costs of Japan- and Korea-made plates are now similar with the price hikes by Japanese firms. Making the situation worse, wages in the freight transportation industry have been recently increased by 15 percent affecting shipbuilding companies. Those hardest hit will be companies like Hyundai Mipo Dockyard, Hanjin Heavy Industries & Construction and Shina Shipping that rely heavily on land transportation. If the wage negotiations in the land transportation sector spread to the marine sector, other firms like Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries will also face higher costs.


The Korea Herald  


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