THIS IS THE EPOCH OF STATE CAPITALI$M
Korean Government Pledges Financial and R&D Support for Shipbuilders
The South Korean government announced a new round of financial support for the country’s shipbuilding industry during a visit by the Deputy Prime Minister and Minister of Strategy and Finance to the Hanwha Ocean yard in Geoje. The new support comes as the industry continues to struggle with rising costs and competition, as well as slowing orders.
The government officials cited the strong contribution shipbuilding is making to the country’s economy while stressing that they would expand the industry’s leadership in eco-friendly shipping and new technologies. They highlighted that the industry contributed $9.22 billion to the country’s export volume in the first half of this year, an increase of 12 percent from 2022. The total orderbook is reported to be at nearly 39 million compensated gross tons, the highest level in 12 years.
Despite the industry’s success in the first half of 2023, orders are lagging behind 2022 levels. HD Hyundai reports that in total it has received nearly $15.5 billion in orders in 2023, which is 98 percent of its target which was lowered from its 2022 target of $17.4 billion due to the slowing in the industry. Samsung Heavy Industries has secured $6.3 billion in orders, which is 66 percent of its annual target, while Hanwha Ocean blames the uncertainties until it closed the acquisition of Daewoo Shipbuilding & Marine Engineering (DSME) contributing to the fact they have only booked a quarter of their annual target or just $1.47 billion in 2023.
The industry continues to struggle with a labor shortage, despite the government relaxing some visa restrictions to attract foreign workers. Now, HD Hyundai’s shipbuilding yards are in a labor contract dispute that could see its workers start a strike as early as this week.
The government officials said the purpose of their visit was to tour the shipyard, including one of the world’s largest dry docks, where Hanwha Ocean can build four large ships at one time. They wanted to hear about the difficulties during meetings with yard and industry executives. Several of the yard’s subcontractors also took part in the meetings.
They announced a three-fold plan that includes increasing government support for financial guarantees issued by the shipbuilders during the construction of ships. It will be the first increase since 2019. They will raise the amount to $300 million from the current $91 million. The government will re-guarantee approximately 85 percent of the bank-issued guarantee. This is to become effective so that it will cover a new order Hanwha Ocean expects to book in the second half of the year from Qatar for LNG carriers.
The government will also expand its training support efforts providing up to $6,000 in payments to workers. This is in addition to other employment efforts to attract more young people to the industry as well as support the use of foreign workers.
R&D support for eco-friendly ship technology to expand low- and carbon-free shipping as well as autonomous ship technology will also be increased. In total, the government plans to provide more than $20 million to continue to develop leadership in these high-value segments of shipbuilding.
During the meeting, the government officials also said they are working on a comprehensive plan to support the growth of the shipbuilding industry. They look to drive industry growth to continue its contribution to South Korea’s export trade.
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