FOR the year 2016, South Korean shipbuilder, Hyundai Heavy Industries (HHI) has set its order target at $19.5 billion, compared to last year’s target of $23 billion.

The company experienced a difficult operation in 2015, as it was hit by significant losses following contract cancellation of a semi-submersible rig and massive losses in the offshore business.
In a new year message, HHI’s President & Chief Executive Officer (CEO) Kwon Oh-gap said: “New orders bagged on relaxed payment terms and cheaper pricing have taken their toll on the shipbuilding, offshore and industrial plant business division”.

He added: “Other divisions, namely engine & machinery, electro-electric systems and construction equipment, have suffered as well: the work has reduced by 20-30 per cent, and several construction equipment shops have even halted operations.”

According to Maritime News, due to the decline in newbuilding orders and a downturn in the offshore oil and gas industry, HHI’s CEOs relinquished their salaries in November.

Furthermore, the company recently made an agreement with its workers to freeze the base pay of yard employees and distribute a 100 percent bonus increase, plus an additional $1,283.

The rigorous cost-cutting is expected to return HHI to profitability in 2016.

“If we remain in the red this year however, the market will no longer wait for us,” the COO added.

Meanwhile, the Baltic and International Maritime Council (BIMCO) has advised shipping industry to prepare itself for a challenging period this year.

According to BIMCO, the shipping industry can expect an uncertain and lower level of support from China, one of the most important drivers of shipping demand growth in recent times, as the country re-evaluates its future growth direction.

The group explained that Europe and Japan, in particular, look like they might provide positive surprises in 2016.

For the dry bulk sector in 2016, BIMCO expects the supply-side to grow by around two per cent (2.6 per cent in 2015E), adding that this will be helped by a new record level of scrapping.

The group said: “On the demand-side, growth is forecast to remain level. Challenging market conditions in China will be likely to affect the level of risk.
“With respect to the tanker market, after the perfect storm a steadier year awaits both the crude oil tanker and oil product tanker markets.

“The two sectors enjoyed an extraordinarily strong freight market throughout 2015, ignited by the drop in oil prices that began in mid-2014 and supported by a relatively low supply-side growth in 2015. It was the best year for all oil tankers since the market crashed in late 2008.
“However, going forward, the significant building of oil stocks in 2015 may slow down tanker demand growth somewhat in 2016”, said the group.

BIMCO expects Iran’s return to the crude oil export market in 2016 to disrupt current trade patterns.
“As Iran rebuilds its market share, it will seek to take the place of neighbouring and West African competitors in supplying European and Asian markets. Time will tell if this will also bring higher tanker demand, but BIMCO does not expect that to happen.”

The multi-year slide in the crude oil tanker fleet growth was reversed in 2015. BIMCO expects the crude oil segment to see a fleet growth of around 4.5% in 2016 (2.3% in 2015E).