Daewoo Shipbuilding & Marine Engineering is looking to capitalize on its fast start to 2019 with further VLCC orders in its sights, alongside fresh contracts for LNG vessels.

Its focus on the two sectors coincides with a drive to boost profitability at a time margins are being squeezed.

Oman Shipping confirms VLCC order DSME banks $365m order for series of four VLCCs

Seoul-listed DSME has secured six new VLCC worth $550m in total during the early weeks of this year, with Sinokor and Oman Shipping Company inking tankers with the shipbuilder.

In confirming the Oman Shipping deal on Friday, DSME said this year’s VLCC tally is already 40% of the way to the 16 it put in the book in 2018.

DSME said it was aimed to secure profitability in the face of rising costs, such as steel prices and minimum wages.

“In this regard, including this contract, all of DSME’s VLCCs which have clinched since last year would create a big series effect thanks to the identical design and specifications of the vessels,” it said.

Shares in DSME climbed 1.11% to KRW 31,950 each on Friday after the shipyard announced its second VLCC order in a week.

Bloomberg data showed analysts are expecting DSME to record an operating profit of KRW 844.7bn and a pre-tax profit of KRW 323.4bn in 2018.

In 2019 the forecast is for an operating profit of 381.4bn and a pre-tax profit of KRW 260.5bn.

DSME, which has been profitable since 2017, banked $5.73bn worth of commercial ship orders last year.

It included 18 LNG carriers and 16 tankers, according to its own data. This gives it a backlog of 40 LNG vessels and 27 tankers.

Bright outlook

DSME said the VLCC orders in the past week had enforced its “bright outlook for new orders 2019” at a time it sees prices and ordering activity gradually improving, aided by new environmental regulations.

It added: “DSME has planned to make their best effort to secure new orders by focusing on both LNGC and VLCC 2019.”

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The deals have come amid continued difficulty for global shipbuilders.

According to Clarksons, by the end of November 2018 only 320 shipyards globally had secured a fresh order in the past year.

This is down by two thirds from 2009 and represented the lowest figure on record, according to data from the world's largest shipbroker.

As TradeWinds has reported this week, Oman Shipping has placed two firm 300,000-dwt VLCCs at Deawoo, with options for one more.

DSME said this was the second time it had landed a VLCC order from Oman Shipping after a five-ship deal in 2008.

The link with Oman was opened via a 2006 pact with the government to build a repair shipyard and a 10-year contract to manage the facility.

By the time the management deal ended in 2016 around 450 vessels were repaired at the yard, DSME said.

South Korea dominates the crude tanker newbuilding market.

Its yards received over two third of all tankers over 78,000 dwt ordered in 2017 and increased that level in 2018, according to Banchero Costa.

South Korean shipyards concluded deals for 29 VLCCs, eight suezmaxes and 13 aframaxes last year, the shipbroker calculates.