Compared to 2022, the global mid-sized ship market order book has increased in 2023, but the actual order size of South Korea’s mid-sized shipbuilders has dropped significantly. Although South Korea’s three major shipbuilding giants – HD Korea Shipbuilding & Offshore Engineering (HD KSOE), Hanwha Ocean (formerly Daewoo Shipbuilding & Marine Engineering) and Samsung Heavy Industries – performed well last year, the South Korean industry believes that the country’s medium-sized shipbuilders are gradually weakening their position.
On February 22, data released by the Overseas Economic Research Institute of the Export-Import Bank of Korea(KEXIM) showed that in 2023, the share of South Korean shipbuilders in the newbuilding market for medium-sized ships (10,000~125,000 dwt oil tankers, 1,000~6,000 TEU containerships, and 5,000~-65,000 m3 liquefied petroleum gas carriers, etc.) would be 6.3%, a decrease from 2022 of 1.1 percentage points.
In 2023, the global new shipbuilding order book for medium-sized ships was 1,049 and 20.39 million compensated gross tonnage (CGT), up 4.6% from 2022. During the same period, the order book of South Korean shipbuilders was only 66 ships and 1.44 million CGT, down 15.5% year-on-year.
Excluding orders from Hyundai Mipo Shipbuilding (49 ships, 1.07 million CGT),a shipbuilding subsidiary of HD KSOE, the rest of South Korea’s mid-sized shipbuilders received orders for only 17 new ships of 370,000 CGT, a decrease of 35.7% from 2022.
Around 2016, South Korean mid-sized shipbuilders Sungdong Shipbuilding and SPP Shipbuilding announced the cessation of their newbuilding operations, leaving only three companies, DH Shipbuilding (formerly Daehan Shipbuilding), K Shipbuilding (formerly STX Shipbuilding), and DaeSun Shipbuilding. HJ Heavy Industries (formerly Hanjin Heavy Industries) has rejoined the mid-sized shipbuilding sector since 2020, but the number of Korean mid-sized shipbuilders competing for orders has remained the same since Daesun Shipbuilding announced its liquidation last year.
With newbuilding demand for tankers and bulk carriers rising, South Korea’s shipbuilding industry is concerned that newbuilding business in the mid-size ship market could be ceded to competing shipyards in China and Japan, due to the slump in medium-sized shipbuilders.
Previously, the Korean shipbuilding industry had been competitive in the mid-sized tanker market, but the situation has changed since 2016.
On the other hand, with the intensification of the Russia-Ukraine conflict, orders for medium-sized tankers, including product tankers and crude oil carriers, have increased significantly. In 2023, global orders were placed for a total of 298 medium-sized tankers of 6.52 million CGT, an increase of 123% from 2022. Gas carriers, including LPG carriers, also grew 118.4% year-on-year, with a total of 41 newbuilding contracts for 680,000 CGT.
South Korea’s industry says the reasons for the low order book of its mid-sized shipbuilders are complex. Labor shortages are one of the primary reasons, along with problems with advance payment guarantee (RG) limits, which have prevented shipbuilders from significantly increasing orders.
The KEXIM said, “If a large number of orders are taken in the midst of manpower shortage, shipbuilders may have to pay deferred compensation for failing to deliver the ships on schedule. The shipbuilding industry needs to consider various kinds of solutions, such as introducing overseas labor and cultivating domestic labor.”
