Based on media reports over the previous couple of weeks flying to South Korea last Tuesday to interview the great and good of the country’s shipping and maritime industries for the upcoming Seatrade Magazine annual Korea report was not the best idea I had ever had. The Korean peninsula appeared from many international news reports to be on the verge of war, possibly of the nuclear variety, as North Korea’s sabre rattling reached new heights.
Arriving in Seoul, which sits less than 40 km from the world’s most heavily fortified border known as the demilitarized zone, the capital seemed to be on anything but a war footing. People were not practicing running into air raid shelters or panic buying. In fact it was all completely normal. The streets were packed with office workers and shoppers and a group of protesters were gathering at City Hall, as is a very regular occurrence.
Over the next few days visiting some of the top people in the nation’s maritime industry it quickly became clear few were truly worried by the threats from the North, but instead shared, and wanted to talk about, the same concerns as the rest of international maritime and shipping industry.
Home to the world’s three largest shipbuilding yards, and once again the world’s largest shipbuilding nation having regained the crown from China, the newbuildings slump is a serious issue. The volume of new orders is now just a third that it was at the height of the shipping boom and prices have dropped to unprofitable levels for the yards.
On the positive side the market does appear to have hit the bottom with owners now in talks to order new ships, in particular product tankers, LNG carriers and large container ships, as they seek to order newbuildings at the lowest possible prices before the market turns up again. However, while demand is set to push prices up marginally this will do little to improve the yards' bottom lines overall.
As the world’s largest shipbuilders look to cement their future offshore has very much come into play. Although offshore has long been a part of the mix, especially drillships, it was always the smaller part of the business with shipbuilding dominant. This is no longer the case and it is likely that offshore will become an ever larger portion of the business as Korea’s yards seek to insulate themselves from Chinese competition in the commercial shipbuilding sector. Service providers such as Korean Register are following the same pattern.
When it came to talking to Korean shipowners topics and concerns were again the same as their international counterparts: low freight rates, high fuel costs and the benefits of eco-ship designs.
It has been a tough few years and there have already been some casualties such as Korea Line Corp, and STX Group is looking in an increasingly difficult position as it struggles with cashflow.
North Korea may have dominated the headlines from the Korean peninsula in recent times, but for maritime businesses how to survive and then thrive in the current market remains the top concern.
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