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South Korea's Hyundai Merchant Marine (HMM) has entered a formal contract with Daewoo Shipbuilding & Marine Engineering (DSME) for the construction of five 300,000dwt very large crude carriers (VLCC).

The deal also includes an option to build five additional VLCC vessels.

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The construction of the carriers is expected to cost around KRW470bn ($420m) and will be financed by the Korean Government’s KRW2.6tr ($2.28bn) New Shipbuilding Programme.

Both HMM and DSME signed a letter of intent (LoI) for the newly finalised deal in April.

Deliveries under the new order are scheduled to take place in sequence by the first half of 2019.

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HMM CEO CK Yoo said: “I expect this deal will help the Korean shipbuilding and shipping industries grow together.

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“HMM will develop itself as one of the world’s most competitive shipping companies.”

The company previously established a ‘newbuilding examination committee’ last year in order to review various conditions such as demand / type / number of vessels and market trend, as well as the investment feasibility associated with newbuild vessels.

"The construction of the carriers is expected to cost around KRW470bn ($420m) and will be financed by the Korean Government’s KRW2.6tr ($2.28bn) New Shipbuilding Programme."

Commenting on the signing of the LoI for the deal, Yoo said: “We currently operate 12 VLCCs, which have been foundational to stable profits and enhancing sales competitiveness.

“We thought this year is the right time to order new VLCCs at historically low newbuilding price.

“HMM’s fleet competitiveness in the medium and long run will be further strengthened through the New Shipbuilding Programme.”

The company also announced its intention to place an order for small-to-medium sized container ships.

Image: DSME CEO Jung Sung-leep (left) and HMM CEO CK Yoo (right). Photo: courtesy of Hyundai Merchant Marine Co Ltd.