Korean Shipbuilders Vexed by Cancelled Orders

Some owners are cancelling as they lack funds to complete the purchase of the ship.

Many of the orders are being cancelled after the ships have been built, as the buyers find they can't pay for the product amid worsening economic conditions, reports the Arirang News.

Samsung Heavy Industries, one of the four leading shipbuilders in Korea, has asked a client in Italy to change its mind about cancelling a contract for a medium-sized oil tanker, which was scheduled to be delivered by the end of the year.

According to Arirang News, many of Korea's shipbuilders are struggling with the same problem and the losses are even greater under a new payment method adopted in 2008 during the global financial crisis.

The previous top-heavy method called for five equal payments until delivery, guaranteeing the shipbuilder at least 60 percent of the price even if the buyer changed his mind. However, under the new payment system, known as the heavy-tail method, 70 percent of the money is paid after the contract cancellation deadline.

When the first orders under the new system were placed three years ago, the shipbuilders had hopes that conditions would pick up.

Source: Arirang News