Korean shipyards have been hit hard by the global financial meltdown.
Shipyards used to act as a sort of buffer against currency fluctuations, Asiasis has reported. This is because ship contracts are worth millions of dollars and the down payments are often sizeable.
However, the exports-driven country's currency, the won, has plummeted in value against other currencies. The usual practice in Korea is for shipyards to take a US$10 million down payment on an order worth US$100 million for a ship deliverable in 2010. The remainder is paid in five installments until the delivery. As new orders have all but dried up however, the shipyards' ability to keep the currency up has also diminished.
Hyundai has already cut its 2009 orderbook target by 23 percent to US$21.1 billion; similarly, Samsung shaved a third from its 2008 orders for this year.
"There is a high chance that shipbuilders may experience severe difficulties in getting new orders over the next few years, as ship owners are hesitant to make new orders amid the global economic downturn," Han Jong-hyup, the Vice President of the Korean Shipbuilders' Association was quoted as saying by Asiasis.