Daewoo Ship Receives Record 2.44 Trillion Won Order

By Kyunghee Park

July 4 (Bloomberg) -- Daewoo Shipbuilding & Marine Engineering Co., the world's third-largest shipyard, received a contract for 16 container vessels from A.P. Moeller-Maersk A/S for a record 2.44 trillion won ($2.3 billion).

The ships, which can each carry 7,450 20-foot standard containers, will be delivered by June 29, 2012, the Seoul-based company said in a regulatory filing today. Copenhagen-based Maersk announced the order yesterday, without giving the value.

South Korean shipyards are expected to win record orders for a sixth year as buyers turn to the world's biggest shipbuilding nation amid delivery delays by Chinese yards. Growing global demand for shipping cheaper consumer goods from Asia and commodities to the continent increased the need for more ships.

``Shipbuilders in South Korea are winning more orders at higher prices because of the delays'' with Chinese shipbuilders, said Lee Bong Jin, an analyst at Eugene Investment & Securities Co. in Seoul. ``More orders for container vessels are expected in the second half as more commodities are transported by containers.'' He rates Daewoo Shipbuilding a ``buy.''

Daewoo Shipbuilding rose 0.8 percent to 36,900 won as of 11:37 a.m. in Seoul, after gaining as much as 3.7 percent. The stock has dropped 28 percent this year, compared with a 16 percent decline in South Korea's Kospi index.

Higher Rates

Daewoo Shipbuilding is charging about $153 million per ship, higher than shipbroker Clarkson Plc's average price of $137 million for a vessel that can carry 8,000 containers, Lee said. Including the latest order, the shipyard has received $9.83 billion worth of contracts, achieving more than half of this year's $17.5 billion target.

Maersk, the world's biggest shipping line, will deploy the vessels between the east coast of South America and Asia and Europe. In the last five years, trade between Asia and South America rose more than 20 percent a year on average, and will remain in the double digits in the next five years, Maersk said.

Hyundai Heavy Industries Co., the world's largest shipbuilder, in June won a $1.2 billion contract from Maersk to supply 18 ships that can each carry 4,500 containers. South Korean shipyards accounted for more than half of the world's ship orders by tonnage in the first five months of this year.

China Delays

Chinese shipbuilders probably delayed about 45 percent of their deliveries at the end of last month, due partly to a shortage of components, according to Lee Jae Kyu, an analyst at Mirae Asset Securities Co. in Seoul. That compares with the 25 percent delay rate in 2007, he said.

``There weren't a lot of orders for container vessels in the first half because shipping lines were trying to lower prices,'' said Lee Jae Won, an analyst at Tong Yang Investment Bank in Seoul. ``They now realize they can't wait too long because dock spaces are being filled up and they will have to wait longer to get the ships delivered.''

A crane accident at Hudong-Zhonghua Shipbuilding (Group) Co., a unit of China's biggest shipyard, on May 30 may cause further delays to Chinese deliveries, Eugene Investment's Lee said.

``Hudong is one of the two shipyards in China that can build these big container vessels and the crane accident means there are fewer yards the shipping lines can go to for these type of ships to be built,'' he said.

Two 600-ton cranes at Shanghai-based Hudong-Zhonghua collapsed in May, killing three people and injuring two. Hudong- Zhonghua hasn't given details on lost production time or costs.

Cranes are used to move blocks, or steel structures that make the hulls of vessels, to docks. They are also used to load heavy parts onto ships under construction.

To contact the reporters on this story: Kyunghee Park in Hong Kong at kpark3@bloomberg.net