Will the Suez Canal Accident Boost the Value of Japanese Ships and Domestic Shipbuilding Stocks?

[Asia Economy Reporter Ji Yeon-jin] Following the recent ship accident in the Suez Canal in Egypt, trust in Japanese vessels has disappeared after China, leading to expectations that the value of domestic shipbuilders will rise.

Park Moo-hyun, a researcher at Hana Financial Investment, said on the 28th, "Frequent breakdowns of ships built in China have become too familiar by now, but trust in the quality of ships built in Japan has also disappeared due to the weak excuse that they cannot withstand the wind," adding, "Orders for ships from Korean shipbuilding will increase even more explosively."

The 21,150 TEU container ship that ran aground in the Suez Canal is the 'Ever Given,' delivered by Japan's Imabari Shipbuilding in 2018, and this vessel was equipped with a scrubber (wet scrubber system). In the Suez Canal, ships operating open-type scrubbers are fined, and discharging wastewater from scrubbers while passing through the canal is prohibited.

Therefore, it is presumed that the Ever Given used low-sulfur fuel oil when passing through the Suez Canal, and due to differences in fuel characteristics, the propulsion engine was damaged and lost power. If a ship sways in strong winds on the world's busiest maritime route, questions from shipowners and marine insurers regarding the shipyard's basic design capabilities and the inspection process by the responsible classification society concerning the ship's quality are anticipated. Researcher Park explained, "Responsibility for design errors and issues related to the required propulsion speed considering wind direction and wind speed on the hull will soon expand to the responsibility of the classification society."

On the domestic stock market on the 26th, not only shipping stocks but also shipbuilding stocks surged significantly. Based on the closing price, Korea Shipbuilding & Offshore Engineering rose sharply by 11.39% compared to the previous day, hitting a 52-week high during the session. Hyundai Mipo Dockyard (10.21%) also reached a 52-week high during trading. Daewoo Shipbuilding & Marine Engineering (6.95%) and Samsung Heavy Industries (6%) also rose steeply.