Seoul Beneficiaries

According to a report in the International Herald Tribune (August 2, 2007), investors in three Korea shipbuilders fared better this year than if they had put their money into technology or internet stocks like Apple or Google.

“The gains should keep coming,” the report stated. “A rising tide of orders for container ships could lift shares of Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding and Marine Engineering to record levels as a boom in the global shipping trade shows no sign of slowing. Google shares surged almost sixfold since going public in August 2004. Hyundai Heavy shares are up 14-fold since then and have added 174 percent this year.

“Samsung and Daewoo shares have gained 115 percent and 103 percent, respectively, this year. That compares with an 11 percent gain for Google and 55 percent gain for Apple. For Park Hyoung Ryol, a fund manager at Consus Asset Management in Seoul, there is really no comparison.

“‘For shipbuilders, their earnings are transparent because you know what their order books are going to be like for the next few years,’ said Park, who owns shares of Hyundai Heavy and other shipbuilders and does not plan to sell any in the near future.

“The South Korean companies, the world’s three largest shipbuilders, are receiving premium prices for their vessels, fattening profit margins, while a growing backlog will keep their dockyards running at full capacity for years to come …”

“Daewoo bolstered its full-year target for new orders last month by 55 percent to $ 17 billion. Samsung raised its goal by 36 percent to $ 15 billion after the Seoul-based company became the first shipbuilder to exceed $ 10 billion in orders in the first half of a year. South Korean yards captured almost half the $ 105.5 billion in new worldwide orders last year.

“A lower-than-anticipated level of orders for liquified-natural-gas carriers has opened up limited dockyard slots that can be used to build container ships.

“‘This will prolong the industry’s boom as these contracts may have to be carried over to next year as space is tight at the moment,’ said Kim Soo Jin, an analyst at Hannuri Investments & Securities in Seoul.”

None of this impresses U.S. economists, however. Rather than compete with efficient foreign shipbuilders, our brain trusts remain convinced that we can make a lot more money manufacturing motor vehicles. Indeed. Last week it was revealed that General Motors LOST more than $ 145 for every vehicle sold in 2006. The same report stated that Toyota’s PROFIT per vehicle in 2006 was in excess of $ 3,300!!

[But building container ships in U.S. shipyards is a no-no! It may not be very profitable, y’know.]