South Korean shipbuilders and shipping companies will seek to raise billions of dollars through stock market listings in the second half of 2021 as industries enjoy a recovery in global trade after the Covid-19 pandemic.
Shipbuilder Hyundai Heavy Industries and shipping groups H-Line Shipping and SM Line are planning initial public offerings worth a combined $3.3 billion, according to investment bankers familiar with the deals, as companies bet on a potential multi-year supercycle of trade-related sectors after A decade-long stagnation.
“Investor sentiment in the sector is improving rapidly as the industry is entering an upward cycle,” said a South Korean investment banker close to the situation. “We expect strong demand for IPOs as growth is expected with higher vessel prices and freight rates.”
The investment banker said Hyundai Heavy Industries, part of the world’s second-largest shipbuilder, is likely to raise between $1 billion and $1.5 billion from an initial public offering in Seoul in mid-August. Proceeds will be spent on developing eco-friendly vessels and expanding low-carbon production facilities to meet them stricter environmental regulations.
Global shipyards and shipping groups are experiencing their best year in more than a decade thanks to a faster-than-expected recovery in global trade, with rising demand leading to Leap in shipbuilding orders and shipping rates.
Ship orders doubled globally in the first quarter of the previous year, to 10.2 million gross tons compensated, a measure of the work required to build a ship, according to industry tracker Clarksons Research. Korean shipbuilders won over half of those orders.
Clarksons expects global orders to jump nearly 50 percent this year to 31.5 million CGT and reach an annual average of 35.6 million CGT between 2022 and 2025. Hyundai Heavy has won 42 vessel orders worth $5.9 billion this year, more than Of the $3.5 billion that was secured in all of 2020.
H-Line Shipping, the country’s second-largest bulk carrier, is expected to raise between $800 million and $1 billion from an initial public offering in November. SM Shipping, a mid-size container shipping company, is likely to raise between $540 million and $809 million in September or October.
Shares in Hyundai Merchant Marine, Korea’s largest shipping group, have more than tripled this year, buoyed by congestion at large ports and Suez Canal disrupted in March.
However, investor fears have clouded over the planned initial public offering of Hyundai Heavy worker deaths. About 50 people have died following accidents and illnesses over the past 10 years, 76 percent of them subcontractors, according to the company’s labor union. The Ministry of Labor last month suspended operations at part of the company’s shipyard in Ulsan, after two workers died this year.
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The Hyundai workers’ union organized a partial strike last month, demanding higher wages and measures to prevent industrial accidents. The company last year announced a plan to invest 300 billion won ($269 million) in safety measures over three years.
We will do our best to prevent this unfortunate situation [workers] “They lose their precious lives in our workplace by making sure that the principle of safety first takes hold,” said Han Young-seok, president of Hyundai Heavy.
Investors are calling for change. “They need to keep their promise to improve [environmental, social and governance] said Park Yoo-kyeong, a consultant at APG, a Dutch pension fund. “As long as worker deaths continue, we cannot invest in this company.”