For Mutual Survival
Hyundai Merchant Marine (HMM) and Daewoo Shipbuilding & Marine Engineering (DSME), which have entered into a revival after a massive restructuring each, signed an unusual contract to build ships. Some experts In the shipbuilding and shipping industries say that behind the deal between HMM and DSEM both of which have suffered from insolvent operation is their largest shareholder is there the Korea Development Bank (KDB).
DSME’s impaired capital has compelled both Korean and foreign shipping companies to avoid giving orders to DSME since last year. The state-run Korea Development Bank (KDB), the largest shareholder of both companies, has been leading financial support for HMM and DSME.
On April 9, DSME and HMM said they signed an letter of Intent (LOI) for building very large crude-oil carriers (VLCC). This letter of intent includes an option of ordering five units in advance and placing additional orders for up to five units. The main contract will be signed by the end of July.
However, it is expected that controversy surrounding HMM's selection of DSEM will not subside in the future, The shipbuilding order was based on a 2.6 trillion won (US$2.3 billion) new shipbuilding program, which was created as part of the government's plan for maritime industry competitiveness enhancement announced last October.
It has been pointed out that the new shipbuilding program quickly created as a backup aims to support HMM after the bankruptcy of Hanjin Shipping. “The KDB, the biggest shareholder of the two companies, may have gone between the two companies,” said an official of a shipbuilding company in South Gyeongsang Province
HMM refuted this allegation, saying that the decision was made via its Investment Deliberation Committee. "This open competitive bidding was conducted with fair evaluation criteria," an HMM officials said. "We applied four criteria to proposals from shipbuilders -- linear performances and project implementation capabilities, technical capabilities, prices, competitive elements in operation costs and so on."