HD Korea Shipbuilding & Offshore Engineering, Hanwha Ocean, and Samsung Heavy Industries saw their stock prices decline year-to-date through July 3, with HD Korea Shipbuilding down 8.64%, Hanwha Ocean down 6.80%, and Samsung Heavy Industries down 2.69%, despite the three major shipbuilders achieving 65% of their annual commercial vessel order target at $17.25 billion. The stock decline accelerated in late June as uncertainty grew over Canada's next-generation submarine project (CPSP) worth approximately $60 trillion, with the country expected to select a single contractor rather than split the project among multiple firms, and the selection scheduled for early July. South Korean shipbuilders have been experiencing record performance since the industry boom cycle began in 2021, with global commercial vessel orders from January to May reaching $102.5 billion, the highest level during this period.
Shipbuilders Achieve 65% of Annual Order Target Amid Stock Decline
HD Korea Shipbuilding & Offshore Engineering closed at 359,000 won on July 3, down 0.83% from the previous trading day and down 8.64% from the January 2 closing price. Hanwha Ocean and Samsung Heavy Industries similarly declined 6.80% and 2.69% respectively over the same period. The three major shipbuilders' commercial vessel orders reached $17.25 billion, representing 65% of their annual targets. Global commercial vessel orders from January to May totaled $102.5 billion, marking the highest level since the shipbuilding industry boom cycle began in 2021. Securities firms forecast the three shipbuilders' operating profits will grow 40% to 80% or more this year, following sharp increases over the past two years.
Canada Schedules Single Contractor Selection for Submarine Project in Early July
Canada plans to select a single contractor for its next-generation submarine project (CPSP) rather than splitting the approximately $60 trillion project among multiple companies, with the selection scheduled for early July. The shift in procurement approach increased investor uncertainty, as South Korean shipbuilders face an all-or-nothing outcome. Stock prices declined sharply in late June as expectations around the project receded, erasing gains accumulated earlier in the year.
Analysts Cite German Competitor Ransomware Hack as Potential Advantage
Baek Joo-ho, a researcher at Hyundai Motor Securities, stated that a subsidiary of TKMS, a strong German competitor to HD Korea Shipbuilding & Offshore Engineering and Hanwha Ocean, recently suffered a ransomware hack, which could benefit South Korean companies in security evaluations. Baek estimated that successfully winning the project would increase the corporate value of South Korea's shipbuilding value chain by more than 15 trillion won. Kang Kyung-tae, a researcher at Korea Investment & Securities, noted that Samsung Heavy Industries established a data center business division, as large ship engines manufactured by shipbuilders are being deployed for emergency and regular power generation at AI data centers. Kang recommended increasing investment weight in the sector, citing continued strong performance expected in the third quarter.
FAQ
Why did South Korean shipbuilding stocks decline in late June despite record orders?
Stock prices fell as uncertainty increased over Canada's next-generation submarine project (CPSP) worth approximately $60 trillion. Canada plans to select a single contractor rather than splitting the project among multiple firms, with the selection scheduled for early July, creating an all-or-nothing scenario for South Korean shipbuilders.
What order performance did the three major South Korean shipbuilders achieve?
HD Korea Shipbuilding & Offshore Engineering, Hanwha Ocean, and Samsung Heavy Industries achieved $17.25 billion in commercial vessel orders, representing 65% of their annual targets. Global commercial vessel orders from January to May reached $102.5 billion, the highest level since the shipbuilding industry boom cycle began in 2021.
