HD Hyundai Heavy Industries Tops Foreign Exchange Gains Among Big Three Shipbuilders in 2024 with KRW 457.1 Billion

[Korea Financial Times, Shin Haeju] As the KRW-USD exchange rate has experienced repeated sharp fluctuations recently, the foreign exchange risk for domestic shipbuilders, who have a high proportion of foreign currency sales, has come under renewed scrutiny. Shipbuilding companies receive orders in US dollars, and the scale of these transactions is so large that they have a significant impact on the domestic foreign exchange market.

Shipbuilders receive payments from foreign shipowners in the form of down payments, interim payments, and final payments. To minimize potential losses from future exchange rate fluctuations, each company employs its own foreign exchange hedging strategies. While it is possible to profit from foreign exchange gains, there is also the risk of incurring substantial losses from foreign exchange losses.

However, complete (100%) hedging is virtually impossible, so both gains and losses occur. Even when hedging is implemented, losses may be incurred if the contract itself is canceled.
According to business reports from the three major shipbuilders—HD Hyundai Heavy Industries Co., Ltd., Hanwha Ocean Co., Ltd., and Samsung Heavy Industries Co., Ltd.—HD Hyundai Heavy Industries recorded the largest foreign exchange gains from such transactions last year.

As of the 17th, business reports from the three companies show that HD Hyundai Heavy Industries posted the highest foreign exchange gains last year with KRW 457.1 billion. Hanwha Ocean followed with KRW 377.2 billion, and Samsung Heavy Industries recorded KRW 13.2 billion in foreign exchange gains.

In terms of foreign exchange losses, HD Hyundai Heavy Industries also posted the highest figure at KRW 255.0 billion, followed by Hanwha Ocean with KRW 231.5 billion, and Samsung Heavy Industries with KRW 41.1 billion.

As a result, net foreign exchange trading profit (foreign exchange gains minus losses) was KRW 202.1 billion for HD Hyundai Heavy Industries and KRW 145.7 billion for Hanwha Ocean. However, Samsung Heavy Industries posted a loss of KRW 27.8 billion.

All three companies operate foreign currency-related derivatives to reduce the impact of foreign exchange losses. Samsung Heavy Industries maintains an FX hedging ratio close to 100%. HD Hyundai Heavy Industries and Hanwha Ocean reportedly maintain a hedging level of about 60–80%. In the case of HD Hyundai Heavy Industries, the company entered into derivatives contracts worth KRW 2.0229 trillion last year.

An industry official stated, “We are conducting foreign exchange hedging at an appropriate level, taking into account the current market conditions, overseas investments, and future outlook,” and added, “We plan to implement FX hedging in consideration of the company’s collection and expenditure plans as well as exchange rate fluctuations.”

Shin Haeju (hjs0509@fntimes.com)