South Korean shipbuilders and sea freight companies will seek to raise billions of dollars via stock market listings in the second half of 2021 as the reopening of economies drives a global trade rebound.
Shipbuilder Hyundai Heavy Industries and sea cargo groups H-Line Shipping and SM Line are planning initial public offerings worth up to a combined $3.3bn, according to investment bankers with knowledge of the deals, as the companies bet on a potential multiyear supercycle for trade-related sectors after a decade-long slump.
“Investor sentiment on the sector is improving fast as the industry is entering an upcycle,” said a South Korean investment banker close to the situation. “We expect strong demand for the IPOs as growth is expected with higher vessel prices and shipping rates.”
Hyundai Heavy Industries, part of the world’s second-largest shipbuilder, is likely to raise $1bn-$1.5bn from a Seoul IPO in mid-August, the investment banker said. The proceeds will be spent on developing eco-friendly vessels and expanding low-carbon production facilities to meet stricter environmental regulations.
Global shipyards and shipping groups are having their best year in more than a decade thanks to a faster than expected recovery in global commerce, with surging demand leading to a leap in shipbuilding orders and freight rates.
Ship orders globally doubled in the first quarter from a year earlier, to 10.2m compensated gross tonnage, a measure of the work needed to build a vessel, according to industry tracker Clarksons Research. Korean shipbuilders won more than half of those orders.
Clarksons has forecast that global orders will jump almost 50 per cent this year to 31.5m CGT and will reach an annual average of 35.6m CGT between 2022 and 2025. Hyundai Heavy has won orders for 42 vessels worth $5.9bn this year, more than the $3.5bn it secured in the whole of 2020.
H-Line Shipping, the country’s second-biggest bulk carrier company, is expected to raise $800m-$1bn from an IPO in November. SM Shipping, a midsized container shipping company, is likely to raise $540m-$809m in September or October.
Shares in Hyundai Merchant Marine, Korea’s largest shipping group, have more than tripled this year, boosted by congestion at large ports and the Suez Canal disruption in March.
The planned IPO of Hyundai Heavy has been clouded, however, by investor concerns over worker deaths. About 50 have died following accidents and illnesses over the past 10 years, with 76 per cent of them being subcontractors, according to the company’s labour union. The labour ministry last month suspended operations at part of the company’s Ulsan shipyard, following two worker deaths this year.
Hyundai’s labour union held a partial strike last month, demanding a pay increase and measures to prevent industrial accidents. The company announced a plan last year to invest Won300bn ($269m) in safety measures over three years.
“We will make utmost efforts to prevent the regrettable situation where [workers] lose their precious lives in our workplace by making sure that the safety-first principle takes hold,” said Han Young-seuk, Hyundai Heavy president.
Investors are calling for change. “They need to deliver on their promise to improve [environmental, social and governance] standards,” said Park Yoo-kyung, an adviser at APG, a Dutch pension fund. “As long as workers’ deaths continue, we cannot invest in this company.”