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Korean Government Decides to Maintain ‘Big 3’ Structure in Shipbuilding Industry
No Big Restructuring
Korean Government Decides to Maintain ‘Big 3’ Structure in Shipbuilding Industry
  • By Michael Herh
  • November 1, 2016, 03:15
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The Korean government concluded that it will maintain the “Big Three” structure in the Korean shipbuilding industry.
The Korean government concluded that it will maintain the “Big Three” structure in the Korean shipbuilding industry.

 

The government concluded that it will maintain the “Big Three” structure in the Korean shipbuilding industry. According to the government plan, with an eye towards standing the new order cliff, not only Daewoo Shipbuilding and Marine Engineering (DSME) but Hyundai Heavy Industries and Samsung Heavy Industries will cut facilities and human resources while the government will place orders for public ships earlier.  The government and the shipbuilding industry are expecting that the shipbuilding market will recover after 2018.   The government also decided to give a financial support of 6.5 trillion won to the shipbuilding industry via ship funds among others. Most of the support is expected to go to HMM, the only remaining global shipping company of Korea.    

The government finalized a plan to increase the competitiveness of the Korean shipbuilding and shipping industries in the Sixth Ministerial Industrial Competitiveness Reinforcement Meeting chaired by Deputy Prime Minister for the Economy Yoo Il-ho at the Central Government Complex in Jongno, Seoul on October 31. Thus, the government virtually finished mapping out a restructuring plan in one year since it formed the pan-government council to restructure industry and companies in October, last year.

Most of all, the plan envisages the maintenance of the Big Three structure in the shipbuilding industry without an artificial restructuring (big deal). The government will carry forward the privatization of DSME which virtually belongs to the government while checking the shipbuilding market.  To cope with liquidity risk that can arise from the on-going new order cliff, the three shipbuilders decided to sell off their non-core business and assets in packages not to mention shutting down docks and cut human resources. At the same time, they will develop new markets such as aftermarket that mixes shipbuilding and the distribution of vessel parts and repairs and the dismantlement of offshore plants.  

The government is planning to promote the placement of more than 250 new orders (11 trillion won) for the next four years including placing orders to build 63 public vessels until 2018. In the mid- to long-term, the government will lead Korean shipbuilders to expand their shares in the big vessel market where they have advantages and will give support to the development of core technologies for smart ships.
 
But the shipbuilding industry and experts are showing cold reactions to the government plan. “It is questionable whether the competitiveness of the Korean shipbuilding industry will rise without a restructuring at a time when order forecasts are falling,” said a representative of the shipbuilding industry.   Some experts criticize that Hanjin Shipping was put under court receivership to save 600 billion won but funds 10 times more than 600 billion won will be injected into the shipping industry to raise its competitiveness.