New Orders Dropped 72 Percent YoY
The Export-Import Bank of Korea recently announced that South Korean shipbuilders’ new orders stood at 670,000 CGT, down 72 percent from a year ago, for the first four months of this year. In the first quarter of this year, the global new shipbuilding orders dropped 71.3 percent year on year to 2.33 million CGT. The total value of the orders is US$5.49 billion, down 77 percent from a year earlier.
South Korean shipbuilders are seriously suffering from the recession. In the industry, the conclusion of a new contract leads to actual shipbuilding activities with an interval of two years or so. Two years ago, they suffered from the extremely insufficient new contracts signed in 2016. In 2018, their shipbuilding volume stood at 7.7 million CGT, the lowest since 2003. At that time, they had to lay off a large number of employees.
The volume required for 2022 is estimated at approximately four million CGT. In other words, a liquidity crisis and a large-scale layoff are likely to be repeated if they fail to raise the volume by five million CGT within this year. It is also estimated that their exports will decrease by US$3 billion to US$4 billion in 2022.
Under the circumstances, the South Korean government is planning to provide eight trillion won and issue refund guarantees without delay for the shipbuilding industry. However, the shipbuilders are saying that a more proactive response is needed for the crisis to come within a couple of years.
South Korean shipping companies are also struggling with the global freight transport demand having plummeted in the wake of COVID-19. They are likely to enter a recession this month in that their transport contracts are concluded three months ahead in most cases. According to the Korea Maritime Institute, their monthly sales already fell 27.4 percent year on year in March this year.