South Korea has unveiled a massive stimulus package for its shipbuilding industry, in a move that will raise the hackles of competition authorities in Europe and Japan.
The Export-Import Bank of Korea (Kexim) will reportedly inject KRW5.2tn ($4.2bn) into the sector to help it overcome the problems caused by Covid-19.
Nomura shipbuilding analyst Jaehyung Choi said the funds could help mitigate the financial risk that small to medium-size shipbuilders are facing.
He added that it could also support shipbuilders’ corporate bonds and shipping finance refund guarantee issuance.
The move was announced following the visit by a high-level Kexim delegation to Ulsan this week to meet shipbuilding leaders.
South Korea’s major shipbuilding competitors have yet to comment on this latest round of state support for its maritime industries.
However, Japan has already launched a complaint at the World Trade Organization over Seoul’s support for its shipbuilders.
Meanwhile, Singapore has said it would start an "in-depth review" into the effect of the proposed merger of Hyundai Heavy Industries and DSME.
Based on feedback from third parties, it said it had been “unable to conclude” that the proposed transaction would not raise competition concerns.
South Korean shipbuilders’ year-to-date newbuilding order run-rate remains weak at between 6% and 16%, according to Nomura.
However, in recent weeks, the yards have been successful in all the main tanker sectors as recent earnings trickle down into newbuildings, according to shipbroker Affinity (Shipping).
HHI recently bagged an order for two VLCCs, its first this year, from Greece’s Evangelos Pistiolis.
Just prior to that, Hyundai Samho Heavy Industries secured orders from Greece’s CM Lemos for up to four suezmaxes, ending the yard's four-month hiatus for large tanker orders.
Daehan has been successful in the LR2 space and Hyundai Mipo Dockyard is reported to have signed letters of intent with European buyers last week for three MRs.
Affinity said it was noticeable that the Korean shipyards seem to be dominating the tanker newbuilding market at the moment.
“Partly that’s because the type of buyers willing and able to move today tend to be the experienced, traditional, cash-rich owners who have consistently prioritised Korean yards and, partly, because the Korean yards have simply been hungrier and earlier,” it said.
“Demand, with a few exceptions, is very much opportunistic and tends to react to particular circumstances, which is normally early positions and cheap prices.”
Affinity said that although the Korean yards will take heart from their recent ability to do deals, they won’t be satisfied.
“A couple of VLCCs and suezmaxes will be a significant relief for HHI, but it is nowhere near enough,” it added.
