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Re: 3xBuBu post# 31465

Thursday, 08/07/2008 8:52:18 PM

Thursday, August 07, 2008 8:52:18 PM

Post# of 72979
shippers should be worried: order cancellations shipbuilders

South Korean shipyards, led by Daewoo Shipbuilding & Marine Engineering Co., the world's third-largest shipyard, plunged Monday on concerns that they may face more order cancellations, analysts said.



Daewoo Shipbuilding dropped 13.85 percent to close at 36,450 won (US$35.8) on the Seoul bourse after it said last Friday a client failed to make pre-payment for a 619 billion won order to build eight container ships.

Hyundai Mipo Dockyard Co., a unit of Hyundai Heavy Industries Co., the world's largest shipyard, sank 6.18 percent to 184,500 won after it said on the same day it had cancelled a 197 billion won order for four product carriers.

Hyundai Heavy also dropped 10.41 percent to end at 275,500 won, and Samsung Heavy Industries Co., the world's second-largest shipyard, also plummeted 7.91 percent to end at 35,500 won.

"Investors are worrying that more order cancellations may come in the future as shipping companies are facing difficulties in gaining funding due to the global credit crunch," said Yoon Phil-choong, an analyst at Samsung Securities.

Kang Young-il, an analyst at Korea Investment & Securities Co., said the order cancellations may show shipping companies are pessimistic on the shipping market, and added that "market sentiment toward the shipbuilding industry is currently not so good."

Shipyards in South Korea, the world's largest shipbuilding nation, have enjoyed a heyday in recent years as global shipping lines bet on rising trade led by China. Also, soaring oil prices are increasing demand for offshore drilling structures and oil tankers.

Hyundai Heavy received $19.8 billion in orders for ships, offshore platforms and other products in the first six months, 62 percent more than a year earlier.

Samsung Heavy won $10.3 billion in orders so far this year, achieving 66 percent of its annual target of $15.5 billion. That increased the backlog to $46 billion, or about four years of work, it said.

On the back of increased orders for high-priced ships, Hyundai Heavy and other local shipyards posted record profits in the second quarter of the year.

Hyundai Heavy's net income rose 57 percent to 655.2 billion won. Samsung Heavy's profit jumped 24 percent to 168.3 billion won.

"The order cancellations are definitely bad news for South Korean shipbuilders... but not so much for their bottom line as for investor sentiment," said Chung Dong-ik, an analyst at CJ Investment & Securities Co. "The industry's business outlook is still bright," he said.

http://research.scottrade.com/public/markets/news/news.asp?docKey=100-218c1850-1§ion=headlines
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