South Korea-based Daewoo Shipbuilding & Marine Engineering (DSME ) has canceled an order worth KRW589bn ($514m) from an unnamed European ship owner, as the company failed to make its first scheduled payment, the company said.

The European shipowner had paid a deposit in June 2008 when it signed a contract for construction of two very large crude oil carriers (VLCC) and two bulk carriers.

The contract period was from 18 June 2008 to 10 December 2011.

Daewoo said euro-zone debt crisis may have caused the cancellation. It is the first such cancellation at a South Korean shipyard in 2011.

Separately, DSME is in talks with Brazil’s state-owned oil company Petrobras, to co-operate with Brazilian companies to build oil-drilling facilities for the country’s offshore development project.

Without disclosing the details of the negotiation, the company said: “The project involves a total 21 semisubmersible drilling rigs and drill ships, and we aim for a portion of the offshore facilities,” a spokesman of the company told Dow Jones.

South Korea’s major shipbuilders have received requests from ship owners to delay the deliveries of about 24 ships worth about $3bn following the debt crisis in Europe.

Oversupply of ships which were ordered earlier outpacing demand for commodities such as iron ore and coal in the dry bulk sector and crude oil in the tanker market is adding to the amount owed.

Global economic downturn and tighter bank financing to the shipbuilding sector is also adding to the earning pain for ship owners.

According industry estimates, the value of a new VLCC, which can carry up to two million barrels of oil, has dropped to around $95m from around $160m since 2008 while the value of a new capesize, large dry bulk vessel for hauling iron ore and coal has dropped to $50m since then.