Domestic Economy

S. Korean Shipbuilder Makes Inroads Into Iran

S. Korean Shipbuilder Makes Inroads Into IranS. Korean Shipbuilder Makes Inroads Into Iran

The second largest shipbuilder in the world and one of the "Big Three" shipbuilders of South Korea, Daewoo Shipbuilding & Marine Engineering, has won the right to manage Iran's state-run shipbuilder, paving its way into the Middle Eastern nation with huge growth potential.

DSME said on Monday it recently signed a memorandum of understanding with the Iranian government to run Iran Shipbuilding & Offshore Industries Complex, The Korea Times reported on its website.

Under the agreement, DSME will also transfer manufacturing technology to the Iranian shipbuilder.

The deal is widely expected to help DSME and other South Korean shipbuilders win orders from refiners and other companies in Iran.

Iran has been seeking to cooperate with South Korean shipbuilders to modernize its aging dockyards. It has been an important task for the country, which holds the world's largest natural gas reserves and the fourth-largest crude oil reserves, to help its shipbuilding industry to build oil tankers and offshore plants.

According to DSME officials, the Industrial Development and Renovation Organization of Iran, the state-run organization in charge of the nation's strategic industries such as automobiles and shipbuilding, is seeking to form a partnership with the Korean shipbuilder.

Among others, IDRO wants to acquire advanced technology and dockyard management knowhow from DSME to transform Iran into a shipbuilding industry hub in the Middle East. The organization also requested DSME to invest in Iran to manufacture equipment and intermediary materials.

Hyundai Heavy Industries, Samsung Heavy Industries and other South Korean firms are also expected to make inroads into Iran, which has quickly emerged as a promising market for struggling shipbuilders in South Korea.

DSME posted a first-quarter loss after incurring more costs to finish some offshore projects, Bloomberg reported.  

The operating loss was 26.3 billion won ($23 million), it said in a regulatory filing on Wednesday, while analysts projected a profit of 5.54 billion won.

The company is among global shipyards driven to losses last year after a foray into construction of floating drilling and production units coincided with a plunge in oil prices.

Daewoo Shipbuilding & Marine Engineering is one of many South Korean companies taking advantage of Iran's opening following the removal of western sanctions against Tehran over its nuclear program.

Earlier this month, South Korean President Park Geun-hye paid an official visit to Iran along with a delegation of more than 230 business figures. Agreements worth up to $45.6 billion were signed between the two sides during the landmark visit.