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Korean Shipbuilding - 1980-2000

In the 1980's, under the Shipbuilding Industry upbringing policy, Daewoo shipbuilding and Samsung heavy industries completed construction of 2 docks and joined in the global competition but 2 rounds of oil shock, continuation of recession in the shipbuilding market and the drop in prices of new vessels, the amount of money needed in the initial stages, depreciation and appreciation after 1987 including labor management dispute resulted in rationalization of the shipbuilding industry.

This rationalization approach in the case of Daewoo shipbuilding made the merger of the subsidiary companies in the effort to save them, and postponement of the loaned money from the Industrial bank was allowed and offers of new loan was also offered. And in the case of Halla heavy industries, Hanjin industries, they were exempted from taxes for taking charge of insolvent enterprises.

Korea Shipbuilding Corporation went bankrupt because of the PROBO vessel dispute and was absorbed to Hanjin group in 1990 and Hanjin heavy industries came into existence and East Sea shipbuilder and Busan repair and shipbuilder were also absorbed into Hanjin. Korea Tacoma was under the status of legal management for sometime before being sold to Hanjin industries. And Inchon shipyard was absorbed into Halla group and the name changed to Halla heavy industries. And new establishment and expansion of facilities was controlled till late 1993 and system of recommended ship export was enacted to prevent accepting low priced-order and overly stiff competition.

The year 1989 was the year in which there was a cataclysmic event in the domestic shipbuilding industry and there were troubling trade issues. As our share of the international market increased to 25 %, pressure continued to mount from advanced shipbuilding countries such as U.S.A, EC etc.

The 1980's brought increase in ocean freight due to factors such as continuing low oil price, flourishing international businesses, and the increase in the transport of petro chemical products and iron ores. Through the 1980's the shipbuilding capacity has steadily diminished resulting in solving the over supply problem and the demand and supply matched.

After 1993, Korea recorded highest business showings leading Japan for the first time due to Japan's appreciated Yen. In the wake of this, the profitability of shipbuilding has improved and an expression such as "Shipbuilding industry lays golden eggs". And Korea occupied 38.8% of the international market share based on the orders in 1993 and therefore surpassing the market share of Japan, which was 32.3%.

This favorable turn in the international shipbuilding and good prospects lifted the restriction on the establishment and expansion of shipbuilding facilities which was a way of rationalization before. In 1994, Samsung heavy industries was the first to construct the 3rd dock and Hyundai heavy industries, Halla heavy industries (presently Samho heavy industries: taken over by Hyundai heavy industries) and Daedong shipbuilding followed suit. On the other hand, Korea came under the IMF format and a lot of industries went through difficulties and in the case of shipbuilding industries, there were more of positive effect than negative ones.

In other words, negative effects such as the increasing burden of paying off foreign debt and the increase of financial cost due to increase in the domestic interest rate were offset by the devaluation of the Korean currency which resulted in the higher profitability of the already ordered vessels and also increased competitiveness. The sales revenue from the shipbuilding industry in 1998 was 11 trillion won, 3 trillion won more than in 1997 and the export revenue in 1998 was $8billions (6.1% of total exports) as compared to $6.5 billions in 1997. Devaluation of won increased international competitiveness in the shipbuilding industry and despite paralysis of domestic financial market and drop of foreign credibility, the shipbuilders got orders worth $7.9 billions, thus earning dollars from abroad which is the key point for Korean economy.

The shipyard construction plan, which started in 1970, was completed in 1983 and in Korea, there were 4 large scale shipbuilders, 7 medium scale, 223 small scale shipbuilders and there were 2 large scale repair and professional shipbuilders such as Hyundai Mipo and Busan repair shipbuilders, thus totaling 234 in the whole country. Large scale shipbuilders, Hyundai heavy industries, Daewoo shipbuilding, Korea shipbuilding corporation, Samsung heavy industries and the seven medium scale companies, Korea Tacoma shipbuilding, Daedong shipbuilding, Daesun shipbuilding, East Sea shipbuilding, Shin-Ah shipbuilding, Inchon shipbuilding, Busan shipbuilding were the members of the Korea Shipbuilding Industry Association.

The international shipbuilding market was brisk and in the history of Korean shipbuilding, the order received was 13,730,000GT. In 1999, in the face of rapid devaluation of won and improved technologies, the price competitiveness between Japan and Korea widened and the received order was 11,840,000GT, becoming no.1 in the world for the second time since 1993. Even in 2000, the received order was 45% of the total in the world, thus keeping the no. 1 spot for consecutive 2 years.