South Korea's mammoth ship builders are facing a crisis they have never faced before. The big three companies towering the global shipbuilding industry have eliminated thousands of jobs this year and are looking at further cuts.
The Korea Labor Institute has estimated that up to 40,000 jobs could be eliminated in the country's shipbuilding industry, which has already seen 20,000 jobs go this year. Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries have all been affected by a continued downturn in the oil sector, which has caused delays in rig and vessel deliveries.
"If things don't start to turn around next year, we could be on a long and painful path," said Hong Sung-in, a researcher at the Korea Institute for Industrial Economics & Trade in Sejong told Bloomberg News.
In the last eighteen months, Samsung, Hyundai and Daewoo have lost a combined 6.6 trillion won (S$8.1 billion), the report said.
The report says companies across the globe linked to the oil and natural gas sector have shed as many as 350,000 jobs since 2014 when crude prices started to drop.
On Tuesday, the West Texas Intermediate (WTI) crude price fell 2.4 percent to $49.30 after data showed US crude inventory surged. Brent dropped 2.27 percent to hit $50.29. From more than $100 per barrel in mid-2014, oil prices plunged to less than $30 in January this year, but crept back up to hover around $50 a barrel.
Saudi Arabia said on Sunday, however, that the downward spiral in oil prices has ended. "The current down cycle is nearing an end ... Market fundamentals, in terms of supply and demand, have begun to improve. We are optimistic that oil prices will continue to improve in the future," Saudi Oil Minister Khalid al-Falih said.
In Singapore, shipbuilder Sembcorp Marine reported a net loss of S$21.8 million in the third quarter, reflecting a hit on business on account of the sustained downturn in the oil and natural gas market.
The rig builder said it was cutting as many as 8,000 jobs and putting in place a salary freeze for the management staff.
According to Reuters, the offshore and marine industry in Singapore is facing a crisis as companies have cut spending to manage the fall in oil prices. Marine services companies like Sembcorp Marine and Keppel Corp, as well the shipbuilding and offshore support companies, have been severely affected by this.
Hyundai Heavy, the world's biggest shipbuilder, will report third-quarter earnings on Wednesday while Samsung is expected to announce the results on Thursday.