All SM Korean shipbuilders feared to fall extinct

Just following the shipping crisis which started in the second half of 2008, the shipbuilding crisis has already lasted over two and half years, reaching the stage that all traditional

small and medium-sized (SM) Korean shipbuilders who have played an important part of Korean shipbuilding industries for the past 20 years may fall to extinction in future, some argue.
Mainly late comers in Korean shipbuilding industry including C& Heavy Industries, Jinse Shipbuilding, Orient Shipbuilding, TKS Heavy Industries and others had collapsed up to the last year without giving any big sense of crisis to other remaining SM shipbuilders here.
But the worries of Korean shipbuilders are gradually mounting with the latest downfalls of several old SM Korean shipbuilding hands as follows. Dae Sun Shipbuilding (DSS) with long tradition and experiences of shipbuilding, located at Yeongdo-gu, Busan, has been delisted by KOSDAQ last March this year with its capital impaired totally. Sekwang Heavy Industries (SHI), a SM Korean shipbuilder specialized in building chemical carriers, filed for the court receivership last April followed by Samho Shipbuilding (SS) that went bankrupt failing to honor its payment this May.
Besides the above-said Korea shipbuilders, there are several other SM Korean shipbuilders struggling in trouble. 21st Century Shipbuilding (21CS), which had started ship repairs and construction of ship blocks in 1998 and had switched to shipbuilding in 2001, experienced difficulties in management, so Yang Seung-chul, its owner chairman, handed over the control of the shipyard to its creditor group composed of three Korea banks namely Korea Development Bank, Woori Bank and Hana Bank at the end of last year. Thereafter 21CS has stopped building 5 ships of 10 on order without further marketing activities for fresh orders and has taken procedures to liquidate the company, it is revealed.
The market players further observe that another Korean shipbuilder, SLS Shipbuilding, based in Tongyeong, Korea, has been taken over by Korea Trade Insurance Corp., confronted with serious management difficulties sparked by labor disputes at the end of last year, and it is placed under the process of liquidation.
SHI, based in Mokpo, Korea, whose parent company, Sekwang Shipping, went bankrupt last year, has been hard pressed, seeking ways to rehabilitate itself under the autonomous management agreement (AMA) signed with its banks, but it is still having hard time as all additional financial supports from them has come to a stop, it is said.
As a matter of fact, most of all SM Korean shipbuilders including new comers are on the point of extinction, apart from 7 major Korean shipbuilders namely Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering, Samsung Heavy Industries, STX Offshore & Shipbuilding, Hanjin Heavy Industries & Construction, Sungdong Shipbuilding & Marine Engineering (SSME), and SPP Shipbuilding (SPPS), the last two of which have grown from SM size to one of the seven major shipbuilders in the middle of 2000s.
Of all SM Korean shipbuilders mentioned above, only two, DSS and SHI appear hard seeking ways for survival, performing marketing activities for new orders under the AMA signed with its banks. Even these SM Korean shipbuilders can hardly endure until the end of this year in absence of financial supports from its banks, shipbuilding experts point out.
What are the main factors behind the hopeless downfalls over the last two or three years of those SM Korean shipbuilders who have grown sound up to the middle of 2000s? The market players ascribe two major factors behind the downfalls, the first, to the lack of their shipbuilding orders received amid the global shipping slump and the second, to their failure to get the upper hand over the emerging Chinese shipbuilders through shipbuilding of specialized ships.
The SM Korean shipbuilders have collapsed from the end of last year to date with their shipbuilding experiences of longer than 10 years, faced with liquidity crisis over last one or two years of shipping slump that had hit them hard in absence of new orders. Most of these SM Korean shipbuilders have concentrated on building 13 to 17K chemical tankers, MPP ships, 32K handy bulkers, but they have failed to secure any new orders at all as they have been pushed out by the emerging Chinese builders under their price dumping.
The majority of SM Korean shipbuilders have no ship designing team and no technical research and development team of their own. This is the first reason why they have failed to differentiate themselves from Chinese shipbuilders as they are weak in research and development of new ship designs including specialized ships.
SSME and SPPS had aggressively invested in enlarging their shipbuilding facilities and in their research and development in the middle part of 2000s just before the global shipping and shipbuilding crises broke out, and they had come across liquidity problems. But they have succeeded in differentiating themselves from Chinese shipbuilders as a fruitful result of their investment in the enlargement of their facilities and in R&D. With this differentiation, they have steadily managed to secure new orders, reaching the stage of stabilization, which has great implications for other surviving Korean shipbuilders.
The market players all agree that the second reason behind the downfalls of the said SM Korean shipbuilders is that their banks gave an excessive squeeze to SM shipbuilders. Though their banks have taken over the management of the shipyards to collect accounts receivables, they have squeezed SM shipbuilders in trouble too hard to minimize their loss and damages by liquidating the shipyards instead of rehabilitating them.