IHI Corp executive chairman Tamotsu Saito claims government subsidies to shipyards in the Far East are putting the sustainability of the shipbuilding market at risk.

Saito’s comments, which were made in his role as chairman of the Shipbuilders’ Association of Japan (SAJ), come after attempts to agree international trade rules for shipbuilding at the OECD collapsed late last year.

The Japanese government earlier claimed the OECD talks stalled because South Korea pulled out of an agreement on subsidies and pricing.

Although Saito did not mention any individual county, his comments are almost certainly aimed at South Korea which provided funds through state banks to bail out DSME and others.

He said: “Massive fund injections and financial supports dishonouring international rules to companies in fatal state by governmental financial institutions have resulted in preserving superfluous capacity that should have been dismissed from the market, and have naturally distorted fair international competition, putting the sustainability of shipbuilding industry in danger.”

Saito said that the failure of the OECD talks was down to a “specific country”.

He pointed out that an earlier industry-level gathering of shipbuilders under the Japan, Europe, South Korea, China and United States (JECKU) grouping had agreed on the importance of having an international agreement on shipbuilding.

He said this made the collapse of the OECD talks “puzzling and irrational”.

“The government support issue is beyond the private sector’s control, and we can only hope that the governments of the relative shipbuilding nations, who are the very parties in charge, will act responsibly and quickly make their serious challenges for promising solutions,” Saito said.

South Korea has claimed it did not sign up to the shipbuilding pact because it would not include the world’s largest shipbuilder China which is not an OECD member.

Japanese shipbuilders have seen their industry go into decline over the last decade in the face of strong price competition from South Korea and China.

Saito’s own company operates in the shipbuilding market through Japan Marine United (JMU). JMU is currently in talks with Imbari Shipbuilding to join forces to make them more competitive.