Deliveries of container ship newbuildings are facing significant delays due to an ongoing labour crisis at South Korean shipyards.

Evergreen is one of a number of container ship operators now in discussion with shipyards to limit the impact of labour issues on its delivery dates.

Broking sources indicate there have already been delays of around three months for some deliveries, with the labour shortfall set to peak at about 10,000 workers this year, according to estimates.

In an extreme case, there is also talk in the market that one Asian liner company has been asked if it would be prepared to wait up to one year before it takes delivery of its container ships.

Other liner companies have apparently agreed to accept delivery within the grace period included in standard newbuilding contracts.

The South Korean container ship orderbook is mainly being built by Samsung Heavy Industries; the former Daewoo Shipbuilding & Marine Engineering, rebranded Hanwha Ocean; and Hyundai Heavy Industries.

HHI appears to be the least affected so far after it was able to tempt workers away from its compatriot rivals.

SHI has also taken action to ease its workload by subcontracting Chinese shipyards to build hull sections.

Far Eastern shipyards have been overloaded with container ship orders as a result of heavy investment by cash-rich owners and operators over the past two to three years.

The current container ship orderbook weighs in at a hefty 71m gt, that is more than double the 25.4m gt on order in 2020, according to figures from broker Clarksons.

The potential financial blow of late deliveries for owners and operators has been softened by the collapse of the container ship market.

Market is suffering

Many of the operators do not need additional tonnage because the liner market is suffering from over capacity.

One container ship expert said the delay in delivery of the new tonnage may be “a good thing” for the moribund container ship industry.

“Ship operators are saying we don’t need all of the newbuildings now,” he said.

The containership market is suffering from over capacity. Photo: Suez Canal

Previously, in the dry bulk and tanker markets, owners have jumped at the chance to pull out of newbuilding contracts because of delays, if the market is depressed.

Although the container ship market is struggling, there are some fundamental differences.

The newbuildings were ordered against a long-term view of supply and demand rather than on speculation.

Most of the newbuildings are dual-fuelled and are needed as part of corporate efforts to decarbonise.

But, the biggest factor is the increasing prices at shipyards. Owners would likely have to pay considerably more for their vessels if they were to walk away from delayed contracts and reorder at a later date.

“If owners were to cancel their newbuilding contracts, there will be companies lining up to take over the vessels,” a source said. “As it is, there is hardly any resale of large container ship newbuildings. Liners need these large ships to be efficient.”

One factor that has stretched the South Korean workforce has been the high demand for LNG carriers.

LNG production has also faced production issues recently.

South Korean shipyards told LNG clients that they could be disrupted by a fire at a Hankuk Carbon factory in May. Hankuk supplies panelling for LNG carriers.

Capacity cuts

The South Korean manpower crisis dates back to capacity and labour cuts following the 2008 economic crisis.

Shipyard workers were laid off and the industry has been unable to recover its labour force to meet the recently higher levels of newbuilding demand, despite the increased use of foreign labour.

Another factor is that more technically demanding LNG and container ships now represent a much larger share of the orderbook than in the past when it was largely dominated by tankers and bulk carriers.

According to Clarksons, LNG carriers now account for 24% of the world’s orderbook and 31% for container ships, on a compensated gt basis. Bulkers represent 15% of the current global orderbook and tankers 8%.

In the decade between 2010 and 2020, on average container ships represented just 16% of the orderbook and LNG carriers 8%.