The 'new ship price index' from Clarkson Research, a British shipbuilding and shipping market analysis firm that indexes the price of newly constructed vessels, is stalling. This is interpreted to mean that the ship new building price has risen as much as it can. Consequently, the recent rise in stock prices for shipbuilders has raised the possibility of a 'peak out' scenario.

However, considering the exchange rate of the Korean won against the U.S. dollar, evaluations suggest that the domestic shipbuilding industry's revenue has improved.

According to the financial investment sector on the 17th, the Clarkson ship new building price index showed a steep rise from 162.67 in January 2023 to 189.96 in September 2024. However, it adjusted from 189.64 in October of last year to 189.18 in November, 189.16 in December, and is currently at 188.8 in January 2025. The Clarkson ship new building price index has surpassed the 180 mark for the first time since the shipbuilding industry's greatest boom period in 2007. Based on the figures alone, the shipbuilding industry is still seen as thriving, but the upward trend has halted.

However, the story changes when the exchange rate is taken into account. The average won-dollar exchange rate jumped from 1,334.82 won in September 2024 to 1,462.74 won currently. The drop in the value of the won is compounded by the interest rate gap between Korea and the U.S. and the impact of the national state of emergency at the end of the year. The Clarkson ship new building price index, adjusted for the exchange rate, has increased by about 8.9% compared to October of last year.

For example, the ship new building price of liquefied natural gas (LNG) carriers, a key vessel type for the domestic shipbuilding industry, has decreased from $261.5 million in September last year to $259 million currently. However, when adjusted for the average won-dollar exchange rate, it has actually risen from 349 billion won to 379 billion won. Similarly, the ship new building price of very large crude carriers (VLCC) is fluctuating around $129 million, but when converted to won, it has risen from 170 billion won to 190 billion won.

Analyses suggest that shipbuilders must consider the exchange rate since they receive vessel sales payments in dollars. Research Institute Choi Kwang-sik from DAOL Investment & Securities noted, "Korean shipbuilders convert initial down payments into foreign currency, and hedge the remaining foreign exchange exposure at 70% to 100% through foreign exchange futures. This means that when the won-dollar exchange rate rises, the ship new building price in won increases, along with the order profit."

Securities firms expect that the revenue of domestic shipbuilders will improve and are raising their earnings forecasts. According to FnGuide, securities firms are predicting that this year's operating profits for the 'Big 3' shipbuilders will total about 2.577 trillion won, with HD Hyundai Heavy Industries at 1.221 trillion won, Samsung Heavy Industries at 773 billion won, and Hanwha Ocean at 583 billion won. This marks an increase of approximately 36 billion won compared to forecasts made three months ago.

Experts identify the period surrounding Donald Trump's second inauguration on the 20th as a critical juncture for the stock prices of the Big 3 shipbuilders. Since President-elect Trump has emphasized cooperation with Korean shipbuilders, the stock prices for domestic shipbuilders have surged by about 30% to 40% in a short time, suggesting that profit-taking sales should be considered.

Source: CHOSUNBIZ