Concerns are rising over Korean shipbuilders in restructuring programs and their creditors, as the former’s business conditions are unlikely to recover in spite of the latter’s assistance, and the cut-throat competition in the industry is predicted to compound the matter.
According to industry sources, SPP Shipbuilding recently signed a contract with a non-Korean shipping company to supply two 50,000 WT tankers. Two months ago, SPP Shipbuilding was given new funding of 485 billion won (US$440 million) from its creditors, including Woori Bank, on the condition that it obtains no new orders without the consent of its creditors. This was because a new order meant increasing losses, with the prices of ships remaining low.
STX Offshore & Shipbuilding, which is currently under the control of the Korea Development Bank, recently concluded a contract with another shipping company as well to build eight LR1 tankers. Korea EximBank, in the meantime, decided to provide 300 billion won (US$272 million) for Sungdong Shipbuilding & Marine Engineering for its business recovery, and has already transferred 90 billion won of it. However, both Hanjin Heavy Industries & Construction and Samsung Heavy Industries, which have been asked to be entrusted with the management of Sungdong Offshore & Shipbuilding, are showing disapproval. The creditors have already invested more than 5 trillion won (US$4.5 billion) in Sungdong Offshore & Shipbuilding.
Things are quite complicated, although it appears that the shipbuilders are winning new orders based on additional funding from the creditors. “Some of the distressed shipbuilders are resorting to a dumping war with the fund, and this is causing the others to jump into the war,” an expert explained, adding, “This is leading to difficulties even on the part of better-off companies and the shipbuilding industry as a whole.”