NEWS / January 12, 2009

Urging of review on restructuring

A governor in a South Korean province strongly opposed the plan of restructuring of small and medium sized shipbuilders, saying it is absolutely disadvantageous to the newly-built shipyards located at the province. On January 11th, Park Joon-yung, the governor of South Jeolla Province, situated in the southwest part of South Korea,

issued a statement on current restructuring process led by government and financial industry and said the reshuffling standards set by financial agencies are seriously unfavorable to the newly-established shipyards in the province and strongly urged reappraisal. He argued that restructuring of s- & m-sized shipbuilders should take place by analyzing the future potential of them, not by the logic of financial industry. South Jeolla Province stressed that s- & m-sized shipbuilding industry had been chosen as government’s strategic business in 2004 and it should be re-examined whether liquidating those smaller shipbuilders would be desirable at a time when they are about to start their business. Besides, the province announced that it is opposed to the ‘same standard’ restructuring on construction and shipbuilding industries as a whole because shipbuilding business provides a great deal of jobs and it is a large-scale export industry. The Korea Federation of Banks recently embarked on restructuring by setting appraisal criteria for ailing s- & m-sized shipbuilders such as ‘experience of newbuilding delivery’, ‘shipyard facilities’, ‘the rate of RG securement’, etc. The shipyards whose line of credit to a main creditor is over 5 billion won ($3.745 million) should have their credit risk evaluated. If restructuring is carried out according to the current standards, shipbuilding industry in South Jeolla Province where most of the shipbuilding companies are ‘green field’ shipyards would likely face forced restructuring. Of some 12 s- & m-sized shipbuilders in the province, some 10 companies would be categorized in the ‘restructuring group’ according to the current standards set by financial industry. Four of them have not delivered a single newbuilding yet, and seven are now constructing docks which are necessary for shipbuilding. It remains unclear, however, whether the province’s urging would be reflected in the current restructuring plan as government’s will for restructuring of shipbuilding and construction industries is so firm.


Hyundai to build new frigates

Hyundai Heavy Industries has been awarded a contract to build the lead ship of the South Korean Navys new 2,300 ton-class frigates to begin service in 2011, a military source said recently.
The Defense Acquisition Program Administration (DAPA) signed the contract worth about 140 billion won Dec. 26 with Hyundai, which had been in charge of the basic design of the state-of-the-art frigate codenamed FFX, said the source. FFX ships will replace the older Ulsan class frigates and Donghae/Pohang class corvettes by 2020, according to the Navy.The first six FFX ships are to be built by 2015 to replace the current nine Ulsan class frigates in service. The lead ship of the Ulsan class was commissioned in 1981.



Clarkson downgraded boxship market

Recently released data from Clarkson research institution revealed, despite the global financial crisis, the containership trading volume will still show growing tendency in 2009.However, it was warned that the massive volume of shipping capacity scheduled to be delivered in 2009 will cut the container ship rental price. Clarkson research institution again anticipated the growth of 2009 global container ship trading volume, and downgrade movement of the 2009 growth rate to about 6.7% when considered the global trading volume will still be affected by credit crunch. It is reported that the current biggest issue is the overcapacity from the massive order backlogs. The growth rate for the 2008 containership shipping capacity stood at 12.6% approximately, and 12.7% was expected for 2009. The difference between supply and demand is about 6% which will drop the freight rates of some major routes and container ship rental price.