Anxiety of Chicken game

Anxiety of Chicken game

World shipbuilding industry could get into the game of chicken following semiconductor industry, according to an agency’s prospect. In the period of last shipbuilding boom and even until recently, many countries, especially South Korea and China had competitively expanded their shipbuilding capacity. But they are now facing a severe order drought and they are highly likely to experience a struggle for existence in the coming years. On March 22nd, Korea Investors Service expressed worries in a report titled “Advance Payment in Headwind and Change in Financial Structure”: “When their order backlog all runs out in two to three years, shipbuilders around the world may get into the game of chicken with their existence at risk.” The report said that the shipbuilding market which got into a severe slump since the latter half of last year would maintain the buyer’s market for a while due to global economic downturn, ship finance cessation and the past intensive newbuilding order boom. It said that given the irreversibility of expanded shipyard facilities and newbuilding ordering activity slacking, harsh competition and decline in ship prices seem inevitable caused by the imbalance between supply and demand. Hong Seok-June, the author of the report said, “Present situations taking place in the newbuilding market are just the beginning of the crisis. Shipbuilders need to strive more to secure ample liquidity.” He said, “Restructuring of some of small and midsize shipbuilders in South Korea and China is possible and governments need to expand financial support including shipbuilding loans increase in the short run.”
Published : March 24, 2009