The South Korean government decided to place 140 orders for liquefied natural gas (LNG)-fueled vessels for small and midsize (SME) shipbuilders by 2025. In addition, the government provides 700 billion won (US$630 million) in new financial aid and extend loans worth 1 trillion won (US$900 million) to small and midsize shipbuilders suffering from financial difficulties.
The government announced a new package for revitalization of the shipbuilding industry on Nov. 22. The plan focuses on small and midsize shipbuilders. It is designed to help them gain expertise in small and medium-sized LNG-fueled vessels and desulfurization facilities, as the global shipbuilding trend is toward environment-friendly vessels.
The package also include measures to alleviate their financial problems and improve their mid- to long-term technological capabilities.
For midsize to large shipbuilders, the government announced support measures in 2016 and April of this year.
The 1 trillion won worth LNG-fueled vessels, which the government will order, exceed the combined sales (601.2 billion won or US$540 million) of domestic SME shipbuilders (78 companies) last year. According to the government plan, these measures will solve order deficiency for SME shipbuilders. The government plans to speed up the ordering by converting two tug boats to LNG fuel lines next year. Yoon Sung-hyuk, head of shipbuilding and offshore division of the Ministry of Trade, Industry and Energy said, "We are considering making it mandatory for all government ships to be LNG-powered starting in 2020.”
However, experts questioned the validity of the plan, pointing out that Korean SME shipbuilders have little experience in making LNG-fueled vessels. An industry watcher said, "Most SME shipbuilders with low credibility fail to get new orders because they cannot issue a refund guarantee (RG)," adding, “The plan is rather impractical for those who are trying to survive every day.”
Meanwhile, the government decided to expand the government-supported RGs to 200 billion won (US$180 million) for SME shipbuilders that have difficulties in issuing RGs and guarantee medium-sized vessels worth over seven billion won (US$6.3 million).