Shipbuilding, Shipping, Defense & Space Terms

A contract to build a ship for a shipowner. Delivery usually takes years after the contract, so today's orders become revenue years later, and shipbuilder stocks react first to order news.

The total volume of ships contracted but not yet built and delivered. A large backlog means work is secured for the next several years, and shipbuilders with plenty of work can pick new contracts at higher prices.

e.g. If the backlog equals three years of revenue, the yard keeps running even if new orders pause for a while.

An index of the average price trend for newly built ships; the one published by UK research firm Clarksons is the best known. A rising index raises expectations for the profitability of ships to be delivered.

Delivery is handing the finished ship to the owner. In a heavy-tail contract most of the price is paid at delivery, so the shipbuilder must fund construction first and cash flow can get tight.

A ship that carries liquefied natural gas chilled to about minus 160 degrees Celsius. It needs special cargo-tank technology, is expensive and few yards can build it, making it a flagship high-value ship type for Korean shipbuilders.

A ship that carries manufactured goods packed in standardized steel boxes (containers). Size is measured in TEU (one 20-foot container), and orders move with global trade volume and shipping lines' fleet renewal needs.

A ship that carries crude oil or refined products such as gasoline and diesel. They split into large crude carriers (such as VLCCs) and smaller product carriers (PC ships), and freight rates swing widely with oil-producer output and shipping distances.

Ships built to run on fuels such as LNG, methanol and ammonia to meet the International Maritime Organization (IMO) carbon emission rules. They create replacement demand for older vessels and are often cited as a reason for shipbuilders' long-term workload.

Huge facilities that extract or process oil and gas at sea. Each project is large, but design changes and schedule delays make losses likely, so offshore plants can bring both big profits and big losses to a shipbuilder.

e.g. A floating production, storage and offloading unit (FPSO) is a typical example.

The price of the thick steel plate used to build ship hulls. It makes up a large part of construction cost, so when plate prices rise, profit falls on ships already contracted at fixed prices.

When materials and labor cost more than expected or the schedule slips, a shipbuilder books provisions for expected losses up front. That is why a yard with plenty of work can suddenly post a loss in a particular quarter.

Freight is the price for moving cargo; a charter rate is the rent for hiring a whole ship. Shipping company profit varies greatly with freight levels, so freight indexes are used as a leading indicator for stock prices.

Liner ships run fixed routes on fixed schedules like a bus (mostly container ships); tramp ships (bulk carriers, tankers and so on) sail under contract whenever there is cargo. Tramp rates tend to react more sensitively to demand changes.

Selling Korean-made weapons such as tanks, self-propelled howitzers, fighter jets and warships overseas. Domestic military demand alone limits growth, so the size of export contracts is a key gauge of a defense stock's growth potential.

A weapon system is a package that bundles the weapon itself with ammunition, training and maintenance. Deals are negotiated government to government and large contracts are often signed in stages, so it pays to distinguish a basic agreement from an actual execution contract.

What a country spends on its military, often compared as a share of GDP. NATO has a target for members to spend a minimum share, so if countries raise their ratios, demand for weapons is expected to grow.

The business of inspecting, repairing and replacing parts on aircraft, warships and weapons while they are in use. Revenue keeps coming for decades rather than ending with one sale, so it is regarded as a stable earnings business.

Repairing and maintaining U.S. Navy ships at allied shipyards. With U.S. yards said to lack capacity, it is seen as an opportunity for overseas yards and a possible stepping stone to new shipbuilding orders.

When war or tension between countries rises, defense stocks tend to climb on expectations that governments will raise defense spending. Ceasefire or peace-talk news can push them down in the short term, so they can be volatile on headlines.

A rocket that carries satellites or spacecraft into space. Launch success and launch frequency show a space company's technology and revenue, so related stocks get more volatile as a launch date nears.

Recovering part of a rocket that used to be thrown away after one use and flying it again. It sharply cut launch costs, made it possible to put up many more satellites, and helped the whole space industry grow.

e.g. The first stage returns after launch and lands on the ground or on a ship at sea.

A satellite orbiting at a low altitude, roughly 2,000 km or less above Earth. Being close to the ground gives short communication delay, but each satellite covers a small area, so they are operated as constellations of hundreds to thousands.

Services that provide internet and phone connections through satellites. They work at sea, in mountains and on airplanes where there are no cell towers, so subscribers and terminal sales become recurring revenue for space companies.

Engine makers often earn more from decades of maintenance and replacement parts (the aftermarket) than from selling new engines. That makes the amount of flying aircraft do important to their earnings.

Paying passengers multiplied by distance flown, the main measure of air passenger demand. When it rises, revenue tends to rise not only at airlines but also at engine maintenance and parts companies.