Korea’s Status as Strong Shipbuilding Power Shaken

The Korean shipbuilding industry, which used to be the world’s best, has been shaken. China, once considered far below Korea, is aggressively chasing the country's industries, so Korean shipbuilding companies cannot win orders. The situation is becoming even more serious, as there is a huge loss in the offshore plant areas believed to create high added value.

According to the report on the rapid growth of Chinese shipbuilding and offshore industries and its implications by the Korea Institute for Industrial Economics and Trade on July 30, China scored the world’s number one in new vessel orders, shipbuilding volume, and remaining order amounts both in 2012 and 2013.

As of last year, the Chinese market share was 35.0 percent in new vessel orders, 30.7 percent in shipbuilding volume, and 33.5 percent in remaining order amounts. Korea accounted for 30.8 percent in new vessel orders, 27.9 percent in shipbuilding volume, and 27.9 percent in remaining order amounts, and ranked number two behind China in all three areas.

This is a result of Chinese government efforts to substitute old domestic vessels, meaning that a substantial portion of new vessel orders are from China, and support financing. The domestic market size of the Chinese shipbuilding industry increased to 534.2 billion yuan (US$86 billion) in 2012 from 21.4 billion yuan (US$3.47 billion) in 2000, a growth of 25 times in ten years.

What is even worse is that the offshore plant industry, which used to be called the future of the Korean shipbuilding industry, is the main culprit of the huge losses.

Samsung Heavy Industries recorded 362.5 billion won (US$352.6 million) of operating losses during the first quarter this year. Hyundai Heavy Industries, the world’s number one shipbuilding company, also recorded 188.9 billion won (US$184.0 million) of operating losses during the same period, and a 1.1037 trillion won loss (US$1.0753 billion) during the second quarter.

Hong Sung-in, a researcher at the Korea Institute for Industrial Economics and Trade, pointed out, “After the restructuring of the Chinese shipbuilding and offshore industries, China will become even stronger, and threaten Korea even more. In order to overcome this situation, new high-quality products, more differentiated and advanced with high value-added technologies, must be developed in shipbuilding, offshore plant, and machinery markets.”