War in Ukraine seriously affecting South Korean shipbuilders

The war in Ukraine is having lingering effects on South Korean enterprises, including shipbuilders and automakers.

Daewoo Shipbuilding & Marine Engineering signed a contract with a Russian shipowner in October 2020 to supply three LNG carriers. One-third of the contract was canceled in May this year, and another one-third was canceled on June 30. The size of the contract fell from more than one trillion won to 337.9 billion won, and even the remaining one-third is about to be canceled.

Hyundai Motor Group’s plant in Saint Petersburg has been shut down since March. The plant has an annual production capacity of 330,000 cars and production resumption there is still up in the air. According to industry sources, Hyundai Motor Russia sold 3,004 cars in May, down 81.8 percent from a year ago. Likewise, Kia Russia’s sales volume dropped 80.8 percent to 3,606.

The war is leading to higher oil prices and this is affecting airlines. According to the International Air Transport Association, the aviation fuel price in Asia and Oceania was US$164.76 per barrel on June 24, up 111 percent year on year. Korean Air’s annual fuel consumption is approximately 28 million barrels and its profit decreases by 36.3 billion won each time the price per barrel rises by US$1.

Samsung Electronics and LG Electronics have consumer electronics plants in Kaluga and Ruza, Russia, respectively. Although these are still in normal operation, their inventories are increasing rapidly. The price of neon gas, which is essential for semiconductor manufacturing, is soaring as well. The war is causing South Korea to become more and more dependent on neon gas from China and the price of the gas from China to South Korea rose six-fold to US$310,000 per ton from May last year to May this year.

Source: BusinessKorea