Continuous Restructuring
South Korean Deputy Prime Minister Yoo Il-ho presided over a ministerial meeting on January 25 to discuss how to revive the South Korean shipbuilding, shipping, steel and chemical industries.
According to him, the South Korean government is planning to further accelerate the restructuring of the shipbuilding industry, which already laid off approximately 7,000 employees last year, with the number of shipbuilding contracts to be signed this year estimated at less than half of that of 2015 and the three largest South Korean shipbuilders predicted to fail to meet their goal of US$22.6 billion in the value of orders received.
Under the circumstances, Hyundai Heavy Industries and Samsung Heavy Industries are likely to have to shut down two and one of their docks this year, respectively. The three major shipbuilders shut down three of their docks in 2016, too. A total of 14,000 employees are forecast to leave the three companies within this year as a result.
At the same time, asset disposal by the major shipbuilders is sped up to deal with the lack of liquidity. Daewoo Shipbuilding & Marine Engineering is planning to sell every asset other than manufacturing facilities while Hyundai Heavy Industries is planning to dispose of its securities company and real estate properties and Samsung Heavy Industries is to sell its non-core assets such as hotels and R&D centers.
In response, the government places new orders for 12 ships before the end of this year, including those for two warships worth 1.5 trillion won in the first half. In addition, it is going to provide special benefits to assist in the reemployment of retirees.
For the shipping industry, the government is to provide a financial support of 6.5 trillion won. Specifically, its program for assisting in the building of new ships is doubled to 2.6 trillion won so that Hyundai Merchant Marine can place orders for at least five ships this year while the amount of execution of the Korea Asset Management Corporation’s 1.9 trillion won ship fund is increased from 200 billion won to 500 billion won. State-run banks such as the Korea Development Bank are to raise a fund of one trillion won so Hyundai Merchant Marine can acquire Hanjin Shipping’s terminal at the Busan New Port.
In the steel industry, the government is to cut back on facilities for oversupply items such as thick plates and shore up the competitiveness of promising items like cold-rolled steel sheets and plated steel sheets by encouraging M&A for manufacturing facility rearrangement. Hybrid and superlight material development is initiated in the third quarter in relation to the fourth industrial revolution and the number of smart steel production facilities is increased that make use of the Internet of Things, big data, artificial intelligence, etc.
In the chemical industry, chemical companies and consulting firms are to form a restructuring research group in the first quarter in order to find out more items prone to oversupply. The government, in the meantime, provides assistance for the development of plastic for use in electric vehicles and drones, functional materials for use in bioproducts and wearable devices, environmentally-friendly and non-toxic materials and so on. Tax incentives for hyper plastic, functional fibers and the like are prepared for more aggressive R&D.