HONG KONG Oct 15 Taiwan shipowner Today Makes Tomorrow Group (TMT) has defaulted on payments for 12 bulk cargo ships with a total contract value of $650 million ordered from South Korea's Hyundai Group, as an industry downturn takes its toll.
Hyundai Heavy Industries Co Ltd and affiliates Hyundai Samho and Hyundai Mipo Dockyard Co Ltd are building the ships, and the group is in talks to resell at least one of the vessels.
"The current market condition is very bad and we are adjusting our operation and forced to forfeit some of the ships we ordered," a TMT spokesman told Reuters on Monday.
TMT, which has cut its fleet by half to about 40 vessels since the financial crisis in 2008, is in talks with Hyundai on how to proceed with the orders, the TMT spokesman said.
"We did not make payments for the ships and the shipbuilder wants to resell them in the market," he said.
Hyundai was close to reselling a vessel of 263,000 deadweight tonnes (dwt), the TMT spokesman said, adding that the Taiwan company still hoped to take delivery of some ships.
Hyundai may suffer losses if the resale prices are lower than contract prices.
The 12 vessels, most of them ordered in 2010, include two 263,000 dwt ore carriers from Hyundai Heavy, two 263,000 dwt ore carriers and seven 84,062 bulk carriers from Samho and one 37,000 dwt bulker from Hyundai Mipo, with a total capacity of about 1.6 million dwt, shipping newspaper Lloyds List reported.
The TMT executive would not comment on payment details of the ships but said the company, which also operates oil tankers and LNG carriers, was at a breakeven level last year although it could make a loss this year.
This is not the first time that TMT, led by enigmatic tycoon Nobu Su, has seen its ordered ships auctioned off.
In May, its two very large crude carriers at Daewoo Shipbuilding & Marine Engineering were auctioned off after TMT failed to meet payments, Lloyd's said.
Su, TMT's chief executive, is looking to diversify the firm's business by investing $2 billion to $4 billion in building a complete liquefied natural gas (LNG) supply chain that is expected to come on stream in 2015.
Its investment includes the re-design of one of its very large oil oilers (VLOOs) into a floating liquefied natural gas (FLNG) unit, which will help extract natural gas from the ocean and convert it into liquid, for shipping to customers in Asia.
When asked how the company could finance such an investment, the spokesman said: "We are going through a very hard time but we will use various means to fund the project, which will span into a number of years." (Additional reporting by Joyce Lee in Seoul, Editing by Clarence Fernandez)