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South Korea's shipbuilding industry is facing disruption

South Korea's shipbuilding industry is facing disruption as unions at major shipyards, including HD Hyundai Heavy Industries, Hanwha Ocean, and Samsung Heavy Industries, prepare for strikes in August. Unionized workers have unanimously voted to strike in August after failing to reach a wage agreement over pay packages. The potential labor disruptions threaten to dampen the long-awaited boom in the shipbuilding industry, primarily driven by increased orders for gas carriers.

Generally, South Korea has faced a severe labor shortage in recent years, intensified by a surge in new shipbuilding orders and an ageing population. To address this, the government expanded the annual quota for skilled worker visas last year and established training and recruitment partnerships with neighbouring countries, leading to an increase in foreign workers within the shipbuilding sector. Securing skilled workers and managing labor disputes are two serious challenges currently facing South Korean shipyards. The looming strikes will further exacerbate the issue of production delays.

South Korean shipyards have experienced labor strikes on previous occasions. In 2010 they faced a series of strikes which occurred amidst industry restructuring and financial difficulties. Further on, back in 2022 major labor unions in the shipbuilding sector voted to strike over wage demands and working conditions.

In a thriving shipbuilding market, such disruptions could benefit competitors. During the first seven-month period of 2024, a total of 908 contracts were signed across the bulk carrier, tanker, container, and gas sectors throughout all the shipbuilding nations. This is nearly double the total orders placed in the same period of 2022 and approximately 35% higher than orders placed in the same period of 2023.

In July 2022, the global orderbook totalled 2,487 vessels cross the four main sectors (bulk carriers, tankers, containers, and gas carriers), with South Korean shipyards accounting for 634 orders or 25% of the aforementioned total orderbook. Gas carriers and containerships had the largest share of orders at South Korean shipyards in July 2022, with 249 gas carrier and 262 container ship orders. As of July 2024, the total orderbook is 3,523 vessels across the four main sectors, with South Korean shipyards having 680 orders which represents 19% of the current total orderbook. What is notable, is that although the total orderbook has increased by 41% (1,036 orders) over the past two years, the number of vessels being built at South Korean shipyards has increased by only 7% (46 orders). The gas carrier sector plays a significant role in South Korean shipyards, with 366 vessels currently under construction there. The container sector follows with 164 orders, while the tanker sector holds the third place with 150 orders. Bulk carrier orders in South Korean yards remain zero as in the previous years.

In recent years, South Korean shipyards have undergone a strategic shift, prioritizing efficiency and technological advancement over sheer production volume. By focusing on larger, more sophisticated vessel designs and leveraging automation, these shipbuilders aim to offset potential workforce reductions and maintain a competitive edge in the global shipbuilding market.

Sale and Purchase

Dry:

S&P activity was subdued last week. In the dry bulk sector the sale of the “Mineral Hiroshige” – 208k/2019 Imabari for USD 70 mills to client of Pan Ocean was the standout transaction. In the kamsarmax segment “Theresa Guangdong” – 82k/2012 Jiangsu Eastern, “Theresa Hebei” – 82k/2012 Sainty Yangzhou and “Theresa Jilin” – 82k/2012 Sainty Yangzhou were sold enbloc for low USD 19 million each. Moving to smaller sizes, the ultramax “Century Zhengzhou” – 64k/2024 Nantong Xiangyu was sold to Norwegians for USD 38.3 mills, “Jal Kamal” – 63k/2020 Imabari was purchased by Europeans for USD 37.5 mills and Chinese acquired “Dolce Vita” – 61k/2012 Oshima for USD 23.5 mills. In the smaller vessel segment of Handysizes, the ice classed “Life Passion” – 37k/2018 Nanjing Dongze changed hands for USD 22 mills and the OHBS “Cielo di Tampa” – 39k/2016 Yangfan was sold at region USD 23 mills.

Wet:

Tanker market activity was subdued , with only four sales recorded last week. The aframax “Seaqueen” – 115k/2004 Samsung was sold for excess USD 30 mills while the MR2 “Nave Orbit” - 50k/2009 SPP changed hands for USD 26 mills. “MTM Gibraltar” - 21k/2003 Kitanihon was purchased for USD 14.5 millis and the chemical tanker “Sambong Hera” – 11k/2018 STX, changed owners for USD 23.8 mills.

Xclusiv Shipbrokers Inc.