Hyundai Heavy Shares Advance as Vessel Prices Climb (Update1)
By Kyunghee Park
May 19 (Bloomberg) -- Hyundai Heavy Industries Co., the world's largest shipbuilder, rose the most in a month after an index of vessels prices climbed to a record, easing concerns that shipyards would be unable to pass on rising steel costs.
Hyundai Heavy climbed 5.3 percent to close at 386,500 in Seoul. Daewoo Shipbuilding & Marine Engineering Co., the world's third-largest shipyard, gained 4.5 percent to 45,000 won.
The weekly Clarkson Index, a measure of prices for all types of vessels, rose on May 16 for the first time in more than three months, as shipyards charged customers more. Shipbuilders are raising prices for oil tankers, container ships and other vessels amid increasing costs for steel.
``The increase in the index shows that despite some concerns in the market, shipbuilders are still able to pass on some of their costs,'' said Lee Jae Kyu, an analyst at Mirae Asset Management Co. in Seoul. He rates the shipbuilding industry ``overweight.''
Samsung Heavy Industries Co., the world's second-largest shipbuilder, advanced 3.6 percent to 43,050 won. STX Shipbuilding Co. climbed 10 percent to 42,300 won.
Shipyards in South Korea, the world's biggest shipbuilding nation, won almost half of the $191.3 billion shipping lines invested in new vessels last year.
The Clarkson Index rose one percentage point to 186, the first gain since Feb. 15, according to London-based Clarkson Plc. The price of a very large crude carrier, the largest of its type, was a record $154.5 million, 5.8 percent more than at the end of December.
``Better Margins''
``Shipbuilders have the advantage and they have been selectively winning orders that bear better margins,'' Martin Song, an analyst at Woori Investment & Securities Co. in Seoul, said in a note dated today. He rates the industry ``positive.''
The Clarkson Index may rise to as much as 190 by the end of the third quarter, Song said in the note. The increase in ship prices will help shipbuilders report higher profitability even after the second quarter, he said.
There have been concerns that higher steel plate prices will reduce profits at shipyards from the second quarter, when the price increases are fully reflected into expenses. The steel product accounts for about 15 percent of annual revenue.
Dongkuk Steel Mill Co., which provides a third of South Korea's demand for steel used in vessels, raised prices for the second time this year from Aril 25. It charges 1.01 million per ton, or 23 percent more. Posco, Asia's third-largest steelmaker, increased prices by 18 percent to 785,000 won starting April 17.
Operating profit at South Korean shipyards exceeded market expectations in the first quarter as they built pricier vessels. Operating profit is defined as sales minus the cost of goods sold and administrative expenses.
To contact the reporter on this story: Kyunghee Park in Seoul at kpark3@bloomberg.net
Last Updated: May 19, 2008 03:16 EDT
bloomberg.com |
