South Korea is today’s leading shipbuilding nation, with 43% of all ships on order. Traditionally strong shipbuilders in Europe and Japan are dropping behind, while the Chinese market is slowly catching up. Three top Korean executives here explain the reasons behind its shipbuilding success.
Since financial turbulence swept through Asia during 1997, Korea has managed to recover from the severe recession. The countrys ability to put a new, market-oriented system into place has proved its success in the shipbuilding industry. Priorities have been given to encourage foreign investments, industrial and land regulations liberalise industrial activities, and new business regulations promote competition.
Investing in new technology
The history of modern Korean shipbuilding is relatively short, about a quarter century of full-scale operation. More than 20 years ago Europe enjoyed high productivity in shipbuilding. From the 1980s the industry moved to Asia, where Japan held the lead until recently overtaken by Korea.
Korean shipyards have primarily built bulk carriers and container ships. In recent years they have invested heavily in R&D, and can now deliver complex vessels such as LNG and LPG carriers, offshore rigs and FPSOs (Floating Production, Storage and Offloading Units).
Shipbuilding is a labour-intensive industry, and increased labour costs are considered a major factor in the shift from European to Asian dominance. One reason for Koreas shipbuilding success might be the ready supply of a cheap, educated and skilled workforce. However, labour costs are now increasing in Korea, which helps explain the growing Chinese shipbuilding market.
The shipbuilding industry employs approximately 46,000 with an average age of 39 much younger than their Japanese counterparts. While Japan experiences difficulties in recruiting skilled staff to the shipyards, Korea has no recruitment problems. This is in part due to the perception of shipbuilding as high-status employment by those working in the industry.
Independent shipbuilders on the international scene
South Koreas three major shipbuilders are Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering. All emphasise the importance of being independent companies competing on the international market.
They are now reaping the benefits of the countrys industrial regulations to liberalise business activities and promote competition. From being part of large industry conglomerates, they are now independent firms quoted on the Stock Market. This new freedom has made them more flexible to meet market needs, and enabled them to reinvest in new facilities.
The three main yards have together delivered over 1,400 ships and numerous steel structures and offshore rigs. Their order books are full until 2003, with a variety of ship types.
Flexibility the key
According to the head of the Shipbuilding Division at Ulsan Shipyard, Jae Byoung Song, the main reason for the South Korean lead is the yards ability to meet market needs by being flexible.
We have to change according to market needs, he says. There is a perceived need for approximately 100 new LNG vessels worldwide in the next four years. There are limits on how many we can build at the same time, but we can manage by being flexible and spread the activity to other yards, or allocate docks for special assignments.
Hyundai Heavy Industries runs the Ulsan Shipyard; it is the biggest shipbuilder in the world, with a capacity of about 60 commercial and naval vessels per year. Nine dry docks can be allocated individually according to demand.
Engineering capability
A high degree of engineering capability is crucial for the Korean yards to succeed, says Moon-Kyu Lim, senior vice president at Daewoo Shipbuilding & Marine Engineering. We have to provide our workforce with continuous training and education. If we fail, they will leave.
Daewoo has its own training package for all new employees. Additional training is provided by Det Norske Veritas, to maintain workers understanding of the most important technology developments and requirements in the industry.
Treatment of waste
Shipbuilding without consideration for safety, health and the environment cannot survive, says C.H.Park, vice president of Samsung Heavy Industries. The treatment of waste has moved to seaborn areas and the shipping industry has to follow up with environmentally friendly transportation. National bodies and the public at large are watching us closely.
Samsung Heavy Industries is meeting the new standards by being the first shipyard in the world certified according to the environmental standard ISO 14001. In addition it has been certified according to the new environmental standard OHSAS 18001.