Hyundai Heavy Industries Co. said Friday it will suspend work at its offshore facilities shipyard in August as orders have dried up, marking the latest setback for the world's biggest shipbuilder.
"We will halt operations till we secure offshore orders," Hyundai Heavy President and CEO Kang Hwan-goo said in a statement.
Hyundai Heavy has two major shipyards in the industrial city of Ulsan, about 410 kilometers southeast of Seoul. One is to build commercial vessels, such as container carriers and liquefied natural gas tankers, and the other is to build high-end offshore facilities, such as floating production storage and offloading (FPSO) units.
Hyundai Heavy has lost out to Chinese and Singaporean rivals in offshore projects in recent years due to higher costs.
In April, a Chinese shipbuilder won an order to build an FPSO to be deployed on the maritime border between Mauritania and Senegal.
Hyundai Heavy said it will have no offshore project at hand after the last part of an offshore module leaves the Ulsan shipyard in late July. That project involves building four fixed platforms in an oilfield about 130 km northwest of Abu Dhabi.
The shipyard's planned suspension will result in large number of idle workers, though Kang didn't elaborate on the issue.
Hyundai Heavy had 15,795 employees as of the end of March.
Kang appealed to employees to cut high fixed costs to win offshore orders, saying there was no way to compete with Chinese and Singaporean competitors whose labor costs are roughly a third of Hyundai Heavy's.
Hyundai Heavy said it is poised to operate the offshore yard when orders come back.
"At this time, we will streamline our organizational resources and create a strategic team to win new orders, which will eventually enable us to offer better services to our clients," said Yune Sung-il, head of Offshore Marketing Division at Hyundai Heavy.
Hyundai Heavy and other South Korean shipbuilders were hit hard by the 2008 financial crisis due to oversupply and lower demand from shipping lines.
Hyundai Heavy has undergone a drastic restructuring process in recent years by cutting its workforce and selling non-core assets to revive its financial status. (yonhap)