Daewoo wins $2bn Maersk order, talks on $2bn

* Deal is for biggest type of container ships

* In talks with Maersk on another $2bn order

HONG KONG/SEOUL: Daewoo Shipbuilding and Marine Engineering has won a $2 billion order from AP Moeller-Maersk AS to build 10 of the world’s biggest type of container ships, a source said on Friday, prompting a jump in the Korean firm’s shares.

Daewoo is in talks to build a further 10 of the ships for Maersk, the owner of the world’s largest container shipping firm, which would mean a total order worth $4 billion and mark the shipbuilder’s biggest ever single order. Daewoo shares jumped more than 8 percent and sent other Korean shipbuilders higher as the news was seen as a sign of confidence in the outlook for trade and raising hopes that further orders would follow.

“The deal has been signed and they are preparing for details ahead of a public announcement expected next week,” said the source, who declined to be identified because the deal had not been made public. Both Daewoo and Maersk declined to comment. Maersk Line’s North Asia chief, Tim Smith, plans to hold a news conference on Monday in Hong Kong over its business plans in Asia. Under the deal, Daewoo will build 10 container ships with a capacity to carry 18,000 twenty-foot-equivalent containers, the largest type of ship available in the sector. The additional 10 ships would be similar vessels.

Daewoo has said it wants to secure $6 billion in shipbuilding orders this year, so the Maersk deal is a shot in the arm for the business so early in the year. “It’s a big boost to Daewoo, which already has some 2-2.5 years of orders backlog so it will help the firm easily achieve its order target for 2011,” said Lee Jae-won, an analyst at Tong Yang Securities.

Such large ships would most likely be used on trade between Europe and Asia, which have the ports that can accommodate such large vessels, analysts said. The deal represented a big win for Daewoo because since 1996 Maersk had built its biggest ships in Denmark, said Tan Hua Joo, an analyst at shipping consultant Alphaliner.

The Danish firm announced in 2009 that it would discontinue shipbuilding in Odense because it could not compete with Asian shipyards. If Daewoo completes the deal, it would be its largest ever single order after one for $2.3 billion from Maersk in 2008.

Maersk decided 15 years ago to operate the largest types of container ships in the world to use economy of scale for a competitive advantage and maintain a market leading position, Tan said. Shares in Daewoo, the world’s number 2 shipyard by number of deliveries, rose more than 8.0 percent before closing 5.7 percent higher on the news on volume that was nearly two times the 30-day average. South Korean shipbuilders jumped 5 percent on a positive order outlook. The world’s top shipbuilder, Hyundai Heavy Industries, rose 2.7 percent and Samsung Heavy Industries gained 6.3 percent.

Maersk shares were slightly lower. The news of the deal was taken in Korea’s stock market as a sign of confidence in shipping and the global trade outlook following the financial crisis. reuters

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