Newbuilding prices firming

Shipbuilding analyst Lee Sok-je working with Mirae Asset in Seoul believes newbuilding prices have bottomed out and are now firming. He says the key determinant of newbuilding price is no longer supply and demand but the price of steel and currency fluctuations, which have shown upward trends. Lee says newbuilding prices have declined by 31%, which is in line with the depreciation of the Korean won from 900 to the dollar to 1,300 early this year. It is currently trading at 1,150 to the dollar. "I would say that among the major currencies, the won remains fairly depreciated against the dollar. Most global currencies have come back to their previous levels [before the economic crisis] or further appreciated against the dollar. I believe there is still room for the won to strengthen further," commented Lee. He adds that around 90% of shipbuilding costs in South Korea are paid in won and the strengthening of the currency would increase yard costs, resulting in dollar-denominated contracts also increasing.