South Korea: Is Shipbuilding Industry Heading for Crisis?

The Wall Street Journal reported this week that the Korean shipbuilding industry will suffer lean times and tough restructuring measures until 2012 due to a sharp decrease in the number of ship orders resulting from the global economic crisis. But industry sources in Korea say that the worst is over, and that orders will begin to come at a normal level from the latter half of next year.  
While the economic crisis started last year, "global shipbuilders continued at full throttle, banging out and welding hundreds of vessels ordered from 2005 to 2007, the biggest years for ship orders ever," the WSJ said. However, global shipbuilding orders this year as of November totaled only 6.5 million compensated gross tonnage (CGT), far below the 42.6 million CGT ordered last year. "Activity in shipyards will start declining next year and slide sharply in 2011 and 2012," the newspaper said.
It typically takes two to three years to build a ship from design to completion. Korean shipbuilders received only a small number of orders this year, and with no rebound in sight next year, the coming two to three years will be difficult for the industry, the report suggests.
Some Korean shipbuilders are in fact experiencing difficulties and implementing restructuring plans. But an executive at a major shipbuilding company said, "Based on the current state of deal negotiations, things will be tough until the first half of next year but we expect them to improve from the second half."
As Korean shipbuilders inked a series of large deals recently, many are optimistic for the future. Daewoo Shipbuilding & Marine Engineering secured a deal for two drilling ships and one semi-submersible drilling rig worth US$1.6 billion on Dec. 17, and last month Samsung Heavy Industries signed a contract with a U.S. firm to build a cruise ship, becoming the first Korean shipbuilder to do so. Korean shipbuilders had 716,097 CGT in new orders in November alone, taking a 71.7 percent share of the global market.