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Chinese firms win orders for world‘s largest container ships
Posted on : Aug.22,2017 18:15 KSTModified on : Aug.22,2017 18:15 KST
Unexpected result is a blow to Korean shipbuilding industry
South Korean shipbuilders are in shock after they lost an order for building the world’s largest container ship to Chinese firms. This upset is thought to symbolize South Korea and China‘s fierce rivalry across a wide range of industries, as the two countries mark the 25th anniversary of establishing diplomatic relations on Aug. 24.
Shipbuilding industry representatives said on Aug. 20 that French shipping company CMA CGM, which was accepting bids on an order for nine container ships with a capacity of 22,000 TEU (twenty-foot equivalent units), recently signed a letter of intent with two Chinese shipbuilding companies (Hudong-Zhonghua Shipbuilding and Shanghai Waigaoqiao Shipbuilding). Prior to this order, South Korea’s “big three” shipbuilding companies (Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding and Marine Engineering) had participated in all of CMA CGM‘s shipbuilding orders. Hyundai Heavy Industries was in the running until the final round, but the order ultimately went to the Chinese companies.
The order for the nine ships is reportedly worth US$1.44 billion. “South Korean companies had a near monopoly in the global market on orders for ultra-large container ships, but now there’s a widespread panic that we‘ve started losing ground to China not only in cheap ships but also in ultra-large and high-value added ships,” said a source in the shipbuilding industry.
The ships in the order will be the largest container ships ever built, complete with a green “dual fuel” system that uses both the standard Bunker C fuel oil and eco-friendly LNG (liquefied natural gas). Stricter international regulations on the sulfur oxides being released by ship fuel had prompted hopes that all of South Korea’s shipbuilders would get new orders for ultra-large and eco-friendly high-value added vessels, but with this turn of events China has landed an unexpected blow in the industry. Korean shipbuilders are already struggling with an unprecedented shortfall of orders, and now they‘re concerned that there may be more trouble ahead as they continue to lose ground to China. While a letter of intent is the stage immediately before the final confirmation of an order, it is reportedly very unlikely that South Korean companies will receive even part of the order for nine ships.
In the first half of 2016, South Korean shipbuilders won orders worth a combined total of 2.83 million CGT (compensated gross tonnage) from 79 ships, but they trailed China, which took first place with 2.9 million CGT, from 133 ships. “Even overseas shipping companies have basically acknowledged that Chinese shipyards are neck-and-neck with South Korea in terms of their building technology and their price competitiveness. When you look at the top 10 global shipbuilders in terms of orders, South Korean companies used to sweep the top seven, but now it’s just the big three, and the rest of the list is filled with Chinese and Japanese companies,” said a source in the shipbuilding industry.
According to a report titled “The 25th Anniversary of the Establishment of South Korean- Chinese Diplomatic Relations,” which was released on Aug. 20, the Hyundai Research Institute stated that South Korea‘s lead over China relative to their technology balance of payments had narrowed from a factor of 44.93 to 3.74 in just 10 years, between 2005 and 2015. The technological balance of payments is found by dividing the total value of intellectual property exports (including manufacturing technology, patents and copyrights) by the total value of imports, with a value of 1 or above meaning a surplus. With China in hot pursuit of South Korea’s production technology, there are increasing concerns that China will join the US and Japan as countries to which South Korea has a technological deficit.
In terms of the export similarity index between South Korea and China (a value of 1 means identical exports), shipbuilding is the sector among South Korea‘s eight leading industries (petrochemicals, steel, steel products, machines, information technology, automobiles, shipbuilding and precision machinery) with the highest level of similarity with China (0.79 as of 2015). “Since 1995, export similarity between the two countries has been increasing in all major industries except for the machine industry,” the institute said.
In a report titled “Assessing the 25th Anniversary of South Korea and China’s Establishment of Diplomatic Relations” released on Aug. 20, the Korea International Trade Association (KITA) predicted that the rate of growth of bilateral trade and investment would gradually slow. This prediction was based on factors including sluggish economic growth rates in both countries, China‘s conversion to a domestic market-focused model of growth, nervousness in international commerce over protectionism, and the continuation of the THAAD conflict. In terms of commodity trade, the report predicted that South Korea’s rate of increase in trade with China over the next five years (between 2018 and 2022) will shrink from the average rate of 7.0% over the pas t 10 years to a yearly average of 5.7% (5.46% for exports and 6.05% for imports).
By Cho Kye-hwan, staff reporter
http://english.hani.co.kr/arti/english_edition/e_business/807851.html
Posted on : Aug.22,2017 18:15 KSTModified on : Aug.22,2017 18:15 KST
Unexpected result is a blow to Korean shipbuilding industry
South Korean shipbuilders are in shock after they lost an order for building the world’s largest container ship to Chinese firms. This upset is thought to symbolize South Korea and China‘s fierce rivalry across a wide range of industries, as the two countries mark the 25th anniversary of establishing diplomatic relations on Aug. 24.
Shipbuilding industry representatives said on Aug. 20 that French shipping company CMA CGM, which was accepting bids on an order for nine container ships with a capacity of 22,000 TEU (twenty-foot equivalent units), recently signed a letter of intent with two Chinese shipbuilding companies (Hudong-Zhonghua Shipbuilding and Shanghai Waigaoqiao Shipbuilding). Prior to this order, South Korea’s “big three” shipbuilding companies (Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding and Marine Engineering) had participated in all of CMA CGM‘s shipbuilding orders. Hyundai Heavy Industries was in the running until the final round, but the order ultimately went to the Chinese companies.
The order for the nine ships is reportedly worth US$1.44 billion. “South Korean companies had a near monopoly in the global market on orders for ultra-large container ships, but now there’s a widespread panic that we‘ve started losing ground to China not only in cheap ships but also in ultra-large and high-value added ships,” said a source in the shipbuilding industry.
The ships in the order will be the largest container ships ever built, complete with a green “dual fuel” system that uses both the standard Bunker C fuel oil and eco-friendly LNG (liquefied natural gas). Stricter international regulations on the sulfur oxides being released by ship fuel had prompted hopes that all of South Korea’s shipbuilders would get new orders for ultra-large and eco-friendly high-value added vessels, but with this turn of events China has landed an unexpected blow in the industry. Korean shipbuilders are already struggling with an unprecedented shortfall of orders, and now they‘re concerned that there may be more trouble ahead as they continue to lose ground to China. While a letter of intent is the stage immediately before the final confirmation of an order, it is reportedly very unlikely that South Korean companies will receive even part of the order for nine ships.
In the first half of 2016, South Korean shipbuilders won orders worth a combined total of 2.83 million CGT (compensated gross tonnage) from 79 ships, but they trailed China, which took first place with 2.9 million CGT, from 133 ships. “Even overseas shipping companies have basically acknowledged that Chinese shipyards are neck-and-neck with South Korea in terms of their building technology and their price competitiveness. When you look at the top 10 global shipbuilders in terms of orders, South Korean companies used to sweep the top seven, but now it’s just the big three, and the rest of the list is filled with Chinese and Japanese companies,” said a source in the shipbuilding industry.
According to a report titled “The 25th Anniversary of the Establishment of South Korean- Chinese Diplomatic Relations,” which was released on Aug. 20, the Hyundai Research Institute stated that South Korea‘s lead over China relative to their technology balance of payments had narrowed from a factor of 44.93 to 3.74 in just 10 years, between 2005 and 2015. The technological balance of payments is found by dividing the total value of intellectual property exports (including manufacturing technology, patents and copyrights) by the total value of imports, with a value of 1 or above meaning a surplus. With China in hot pursuit of South Korea’s production technology, there are increasing concerns that China will join the US and Japan as countries to which South Korea has a technological deficit.
In terms of the export similarity index between South Korea and China (a value of 1 means identical exports), shipbuilding is the sector among South Korea‘s eight leading industries (petrochemicals, steel, steel products, machines, information technology, automobiles, shipbuilding and precision machinery) with the highest level of similarity with China (0.79 as of 2015). “Since 1995, export similarity between the two countries has been increasing in all major industries except for the machine industry,” the institute said.
In a report titled “Assessing the 25th Anniversary of South Korea and China’s Establishment of Diplomatic Relations” released on Aug. 20, the Korea International Trade Association (KITA) predicted that the rate of growth of bilateral trade and investment would gradually slow. This prediction was based on factors including sluggish economic growth rates in both countries, China‘s conversion to a domestic market-focused model of growth, nervousness in international commerce over protectionism, and the continuation of the THAAD conflict. In terms of commodity trade, the report predicted that South Korea’s rate of increase in trade with China over the next five years (between 2018 and 2022) will shrink from the average rate of 7.0% over the pas t 10 years to a yearly average of 5.7% (5.46% for exports and 6.05% for imports).
By Cho Kye-hwan, staff reporter
http://english.hani.co.kr/arti/english_edition/e_business/807851.html
