Hyundai Heavy Industries Co. Ltd observed a rise in share price as ship prices rose

World’s largest shipbuilder Hyundai Heavy Industries Co. Ltd (SEO:009540) saw a rise in its share price following the index of vessels prices climbed to a record high. This also eased the tension of rising steel price. For Hyundai, the share price rose to 5.3% to 386,500 won. World’s third largest shipbuilding company Daewoo Shipbuilding & Marine Engineering Co. (SEO:042660) saw a share price rise of 4.5% to 45,000 won. On May 16, the Clarkson Index rose for the first time in three months because of the rising price of ships. Despite the rising cost of steel, shipbuilders are increasing their charges for oil tankers, container ships and other vessels. Bloomberg reports:

``The increase in the index shows that despite some concerns in the market, shipbuilders are still able to pass on some of their costs,'' said Lee Jae Kyu, an analyst at Mirae Asset Management Co. in Seoul. He rates the shipbuilding industry ``overweight.''

Samsung Heavy Industries Co., the world's second-largest shipbuilder, advanced 3.6 percent to 43,050 won. STX Shipbuilding Co. climbed 10 percent to 42,300 won.

Shipyards in South Korea, the world's biggest shipbuilding nation, won almost half of the $191.3 billion shipping lines invested in new vessels last year.

The Clarkson Index rose one percentage point to 186, the first gain since Feb. 15, according to London-based Clarkson Plc. The price of a very large crude carrier, the largest of its type, was a record $154.5 million, 5.8 percent more than at the end of December.

According to Martin Song, analyst, Woori Investment & Securities Co. (SEO:005940)shipbuilders have been selectively winning orders that comes with better profit margins and the increased price will keep up the profit margin till the end of the second quarter. For the shipbuilding companies, steel products accounts for 15% of the annual revenue; which is why, the rising still prices worried the companies about declining profit margin. Fortunately, the operating profit rose more than expected and resulted into increasing profit.

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Bloomberg

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