Posted on May 13, 2024
Korean shipbuilders, which have been fiercely competing with Chinese shipbuilders on the global stage, reported sluggish shipbuilding in the first quarter of 2024 compared to 2023.
The growing proportion of less-skilled foreign workers on Korean shipbuilding sites is said to be the main factor. Major Korean shipbuilders are faced with the tough task of boosting labor efficiency while preventing safety accidents that fall under the Serious Accidents Punishment Act.
According to Clarkson Research, a U.K.-based shipbuilding and shipping market analyst, Korean shipbuilders delivered 2.48 million CGT of newbuildings in the first quarter. This was down 5.7 percent from the same period of 2023. During the same period, global shipbuilding totaled 8.72 million CGT, up 4.2 percent from the same period of last year, showing a different flow.
The Korean shipbuilding industry believes that although the number of ship orders has increased, the pace of work did not reach a desired level, resulting in sluggish shipbuilding results. “Considering the current level of job security and scheduled deliveries, at least 900,000-CGT shipbuilding volume is needed on average per month, but the first quarter’s shipbuilding performances are estimated to be at an insufficient level,” said Yang Jong-seo, a researcher at the Overseas Economic Research Center of the Export-Import Bank of Korea.
Considering that the utilization rate of large Korean shipyards is on the uptick, the analysis suggests that a decline in work efficiency caused by an increased share of foreign workers is the main factor. According to HD HHI’s business report, the average utilization rate of its shipbuilding division was 81.3 percent at the end of last year, up more than 5 percentage points from 76.2 percent in the first quarter of 2024. Over the same period, Samsung Heavy Industries raised its rate from 90 percent to 97 percent and Hanwha Ocean from 96.4 percent to 97.1 percent.
Industry insiders believe that it will take some time to stabilize the Korean shipbuilding system while ensuring safety as the percentage of less-skilled foreign workers increases. According to the Korean Ministry of Trade, Industry and Energy, more than 8,300 foreign workers were employed at shipyards in Korea from the beginning to August 2023.
“It is expected that the shipbuilding system, which now has a higher proportion of foreigners, will be stabilized soon, and efforts will be needed to speed up shipbuilding while maintaining ships’ high quality,” Yang said. There are concerns that poor shipbuilding performances are directly related to shipbuilding capacities, leading to the weakening of shipyard competitiveness.
