Crisis of Shipping Industry
Korean shipping companies are failing to place orders for large vessels. Under the circumstances, the domestic shipping industry is expected to get more and more enervated, because major shipbuilding contracts are an effective means for tiding over a slump in the sector. Some of the local companies are even disposing of their assets despite the relatively low shipbuilding costs as of late.
According to market research data of Clarkson, a total of 291 post-panamax and larger container carriers were outsourced worldwide between April 1, 2011 and March 31, 2014. Only five of the contracts were awarded by Korean companies.
Global leader Maersk ignited the competition back in 2011 when it placed 10 orders for super-large vessels with an average capacity of 18,270 TEUs. The United Arab Shipping Company, which consists of six Middle East countries including Kuwait, awarded six 18,000 TEU contracts and 11 14,000 TEU contracts last year and earlier this year. Seaspan followed them with fifteen 14,000 TEU orders and twenty 10,000 TEU ones. The Canadian company is planning to procure 20 more mega container carriers by early next year, too.
Those in Asia are moving at a rapid pace as well. For example, the China Shipping Group has recently placed orders for nine 10,000 TEU and four 19,000 TEU vessels, and Singapore’s Neptune Orient Lines awarded 10 contracts for 14,000 TEU ships.
Meanwhile, only Hyundai Merchant Marine placed five 13,100 TEU orders during the same period as a Korean shipping company, whereas Hanjin Shipping, the largest shipping firm in Korea, recorded none.
Industry insiders attribute the current situation to the local shipping finance system. An increasing number of governments, such as th Danish and Chinese governments, have provided large-scale funds for the industry in the form of direct loan and payment guarantees since the outbreak of the recent global financial crisis. CMA-CGM, for instance, returned as the world’s third-largest shipping company thanks to US$150 million from the French government.
In contrast, the Korean government is providing little shipping finance support. “The establishment of the Shipping Finance Corporation has been foundered and the foundation of the Shipping Guarantee Fund, one of its alternatives, is showing little progress for now,” said Senior Analyst Song Min-joon at the Korea Investors Service. “Our competitors are likely to be steps ahead from late this year, when the vessels will begin to be delivered one after another,” the Korea Shipowners Associations added, continuing, “Then, Korea’s shipping industry will be facing even greater difficulties, unless there are some measures to turn the tables.”