The Newbuilding Price Index (NPI) reached 183.2 in February 2023, the first time the index has exceeded 180 since it reached 191 in August 2008. with the increase in newbuilding orders and the rebound in ship prices, the Korean shipbuilding industry is overcoming the most difficult period and starting to recover, with the major shipbuilders returning to profitability.
Although the shipbuilding industry is recovering, but the future does not seem to be all clear. Korean media reports say that the advantage of South Korea’s shipbuilding industry lies in its efficient operation, with a variety of shipbuilding-related industries clustered in specific regions.
However, due to the prolonged economic downturn, many shipbuilding equipment companies centered in Busan have closed down or reduced their production capacity, unable to meet the growing demand with the shipbuilding boom. As the cluster base has weakened, shipbuilding equipment companies have been unable to meet delivery deadlines and have increasingly sought to import from China.
In contrast, the gradual loss of industrial clusters may be only one of the problems faced by the Korean shipbuilding industry, with labor shortages being the biggest challenge facing the industry. During the recession, a large number of workers in the Korean shipbuilding industry moved to other industries or metropolitan areas, and most were reluctant to return to the shipyards.
Normally, companies can ease the manpower problem to a certain extent by simply raising salaries, but this is not an easy task for shipbuilders that have just begun to make profits. The reason is that contract payments for high value-added ship orders signed during the recovery of the shipbuilding industry usually don’t arrive until two to three years (i.e., after the delivery of the ship). Meanwhile, more and more young Koreans are reluctant to stay and work locally, resulting in a surge in the number of foreign workers in Korean shipyards in recent years.
Korean media said that South Korea’s shipbuilding industry currently has 15,500 foreign workers, accounting for 16% of the total shipbuilding labor force. From the first quarter to the third quarter of 2023, South Korean shipbuilders recruited a total of 14,359 new employees, of which 2,020 were Korean, accounting for only 14%; the rest were foreign workers, accounting for 86%.
By the end of 2023, the number of foreign workers at HD Hyundai Heavy Industries Ulsan Shipyard and HD Hyundai Mipo in Ulsan had more than doubled to 5,210, compared to 2,460 at the end of 2022. In the city of Geoje, the number of foreign workers at shipyards has increased by 4,265 to 6,977 in one year, with 95.9 percent of them spread across Hanwha Ocean (3,123) and Samsung Heavy Industries (3,568). The number of foreign workers in Yeongam-gun, Jeollanam-do, where HD Hyundai Samho is located, is 9,657, or 18.4% of the total population, and most of them work in shipbuilding and shipbuilding-related industries.
In fact, South Korea is not the only country facing a labor shortage in the shipbuilding industry; Japan is also facing a serious labor shortage.
Currently, the effective job vacancy multiplier (i.e., the ratio of the number of job vacancies to the number of job seekers) in Japan’s shipbuilding industry stands at 2.5, while the effective job vacancy multiplier for positions such as sprayers is more than four times higher. In this context, the Japanese government has been supporting the development of the shipbuilding industry since 2019 by allowing foreign workers who meet certain conditions to live in Japan with their families indefinitely and to freely change jobs within the same industry.
In recent years, the Japanese Government has fundamentally changed its mindset from viewing foreign workers as cheap labor to coexisting with them in order to maintain Japan’s industrial competitiveness. Foreign workers have been recognized as a key factor in sustaining Japan’s shipbuilding industry and enhancing its competitiveness.
The Korean media says that while many people are concerned about the expansion of foreign workers in the shipbuilding industry, it is clear that the path currently chosen by the shipbuilding industry is one that will eventually be faced by all other industries in Korea. South Korea needs to create a system and environment that will allow foreign workers to be employed in the shipbuilding industry for the long term, improving the skills of the workers while keeping the shipbuilding industry competitive. This is not only to create a favorable atmosphere for the shipbuilding industry, but also to maintain the competitiveness of Korean industries in the future.
To this end, Hanwha Ocean is helping foreign workers solve their language communication problems through pictograms. The pictograms have been translated into eight languages, including English, Nepali, and Burmese, with explanations, and have received an enthusiastic response from foreign workers working on-site at the shipyard.