A court restructuring of Hanjin Heavy Industries & Construction (HHIC)’s Subic Bay yard may have a silver ­lining for the shipbuilder and its customers by ensuring operations continue amid the prolonged shipbuilding downturn.

The South Korean-owned shipyard filed for a rehabilitation scheme in the Philippines this week, as TradeWinds has reported.

One shipbuilding source familiar with the Philippines yard said the continued poor shipbuilding market and low newbuilding prices had left it with a thin orderbook. It was also hit hard by rising material costs.

“As a result, HHIC Subic has ­difficulty getting loans from banks in the Philippines because of the continuing deficit it logged,” the source said.

Share price plunge

After the announcement, the company’s share price dropped by ­almost 30% from KRW 1,495 ($1.33) to KRW 1,075.

But an executive at a shipping outfit that has newbuildings ­under construction at the Hanjin Heavy Industries spin-off said news of the court filing is not all negative.

“This could be positive for shipowners that have vessels booked there,” he said.

Hanjin Heavy Industries & Construction (HHIC)'s Subic Bay yard Photo: HHIC

“The filing will protect HHIC Subic’s day-to-day operation and shield the shipyard from its creditors. Shipowners that have newbuildings there will then be able to take delivery of their ships.

“The newbuildings at HHIC ­Subic are also protected by refund guarantees that were issued by reputable banks.”

Hard times at Subic Bay

HHIC Subic was founded in 2004 during the shipbuilding boom. It is the first overseas shipyard to be established by the South Koreans.

The yard occupies 2.7 million square metres (270 hectares) and has two dry docks: one measuring 375 metres by 100 metres and another of 550 metres by 131 metres.

During the shipbuilding peak, HHIC Subic employed more than 20,000 people. However, with the market downturn, it has reduced its labour force to fewer than 10,000.

The executive said the court ­restructuring programme will follow established international standards.

“We believe HHIC Subic will benefit from it. If the yard is able to carry out the restructuring successfully, it will have a future,” he added.

“HHIC Subic is one of the huge local employers in the Philippines and there will be political pressure to make it [the restructuring] work.

"Also, shipping companies that have newbuildings booked there are prime owners.”

According to well-placed shipbuilding sources, the last newbuilding contract secured by the yard was from Singapore’s Eastern Pacific Shipping, which signed up for two 114,000-dwt LR2 product carriers to be delivered in the first quarter of 2020 at a reported price of around $50m each.

Last month, Unisea of Greece was reported to have placed an ­order for a pair of 113,000-dwt crude carriers for delivery next year. However, TradeWinds is told the deal did not materialise.

According to Clarksons’ Shipping Intelligence Network, HHIC Subic has delivered 118 vessels ranging from mega-size containerships to bulkers and VLCCs. Its orderbook is listed with 14 aframaxes and two VLGCs.