Shipbuilding in South Korea… Expansion Continues

The South Korean shipbuilding industry continues to expand despite the protests of OECD member states. While many feel that expansion in the shipbuilding industry is unproductive at a time when newbuilding orders are still hard to come by, South Korea continues to expand building facilities, with the intention of taking an even larger share of the world's shipbuilding orderbook.

The most ambitious plans involve the new shipyard being built at Mokpo by Halla Engineering and Heavy Industies (HEHI). The new Samho facility will comprise two 500,000- dwt building docks. Newbuilding work has already begun at the yard, which has an impressive orderbook of two VLCCs, cape-size bulk carriers, product carriers and suezmax tankers. The VLCC order comes from Halla Maritime Corp., the shipowning arm of the group.

Last year, Samsung Heavy Industries (SHI) on Koje Island completed construction of a new 2,099 x 322-ft. (640 x 98-m) building dock, which is capable of building up to ULCC size. It also has ambitious plans to increase turnover during the 1995 financial year to $1.34 billion from $927 million in 1994.

The last of the large new construction plans is at Hyundai Heavy Industries (HHI). The Ulsan yard, already the largest single shipbuilding complex in the world, has two more building docks under construction, both 1,181 x 230-ft. (360 x 70-m) (VLCC size), the first one due for the first keel-laying in March. HHI denies that this is an expansion program, with the official line saying that the existing newbuilding facili- ties in Ulsan are insufficient for the current orderbook in terms of space and working conditions. HHI said that the two new docks will merely constitute a spreading out of the current building facilities.

While Daewoo Heavy Industries (DHI) is not involved in physical expansion plans, the yard's productivity improvements over the past five years at the large Koje Island shipyard have led to a 50 percent reduction in the time newbuildings spend in the building dock.

The majority of large South Korean yards concentrate newbuilding marketing efforts on the large tankers, bulk carrier and containership markets. Recent orders have included a series of four large containerships for Singapore's Neptune Orient Lines (NOL) to be built by Samsung; seven smaller containerships, also to be built by Samsung, for China's Cosco; three medium-size containerships to be built by HHI for Hyundai Merchant Marine; and two smaller containerships to be built by Daewoo for Germany's NSB Niederelbe. From the tanker market, orders have been won by HHI to extend the series of 110,000-dwt ships from Norway's K.G. Jebsens from four to six; and two 150,000-dwt oilers for Greece's Ceres Hellenic from Samsung.

On the bulk carrier side, orders include two panamax vessels from Brazil's Docenav for HHI; two new 135,000-dwt units from Hanjin, both for unnamed South Korean owners; two 73,000-dwt units from Hall for Halla Shipping Corp., and two 170,000-dwt units for Daewoo, one for Cosco and one for Japan's Mitsui OSK.

The charter deals preferred by many of the major oil companies have already been seen with the series of product carriers from Halla and the five VLCCs from Daewoo. Both contracts involve ownership and long-term bareboat charters to Shell.

The LNG market is also a major part of all of the yards' ambitions. Stateowned Korea Gas Corp. originally ordered four large LNG carriers, three to be managed by Hyundai Merchant Marine, and built at HHI, and one to be managed by Hanjin Shipping, and built by a joint venture between HHI (the ship and two tanks) and DHI (two tanks). Two of the HHI spherical design ships have already been delivered, as has the Hanjin ship which has a Gaz Transport containment system. According to sources in South Korea, the expected total fleet required for Korea Gas Corp. over the next few years is a fleet of 12 ships, the next batch of four shortly. Meanwhile, projects in Oman and Indonesia are being followed closely by the various South Korean yards.

But the two sectors that all yards are keen to penetrate on a long-term basis are the fast ferry and cruise markets. HHI, Hanjin, Daewoo and Samsung have been involved in fast ferry building programs, all for domestic operators, but international orders have yet to be won. As for cruise vessels, it is unlikely that domestic owners would get involved so the penetration will have to come from the international market. This, the yards see as difficult with the European yards currently dominating the scene.

Ship Repairing The ship repair industry in Sourth Korea is dominated by Hyundai Mipo Dockyard (HMD), with four large graving docks, the world's largest single repair complex. HMD plays an important part in the world's shiprepair industry, concentrating on niche markets such as bulk carriers, containerships and the conversion industry. South Korea also has a vast domestic fleet, which tends to use South Korean ship repair yards for scheduled dockings. Most South Korean yards admit to a slightly (10 to 15 percent) higher price level basis than the Singapore area. However, South Korea is ideally located for ships trading into Japan, as long as no lengthy tank cleaning operations are required.

Expansion has again been the theme at HMD's Ulsan shipyard. Recent plans completed include the widening of its No. 4 graving dock by 36 ft. (11 m), which now has dimensions of 984 x 246 ft. (300 x 75 m) to allow more simultaneous dockings, and the extension of the deep draft quayside space on the yard's western side by another 1.25 miles (2 km), as it recently lost quayside space on the eastern side of the yard to Hyundai Offshore. The extension of the No. 4 graving dock has resulted in the yard now having a total of four drydocks, each with the capability of accommodating VLCCs, although due to geographical location, the main market for HMD is bulk carriers and containerships.

Another part of HMD's expansion programs is the construction of a new hatch cover repair and manufacturing shop within the yard's confines. It is the intention for HMD to become a major manufacturer of hatch covers within the next few years. With a workforce of 3,000, which has been steady over the past few years and not involved to a great extent in the political disruption experienced at Hyundai's newbuilding yard, the delivery time for large scale repair, refit and conversion contracts often leads to HMD becoming very competitive.

Conversion work has always been a niche of the maret in which HMD has been successful.

South Africa's Safmarine recently awarded a conversion contract to HMD involving the alteration of the bulk carrier Recife to a specialized liquid pitch aluminum carrier.

The vessel arrived in the yard last October, and was due for completion in January.

HMD has also won a two-ship contract from Spain's Elcano for the re-engining of the two bulk carriers Castillo de la Luz and Castillo de Lopera, both of which were originally built as coal-fired steam turbine ships.

Last year, the yard completed the $24 million Sunrise 2000 project, which involved the conversion of the 8,675-dwt heavy lift vessel Sunrise to a specialized pipe-laying vessel for Coflex of France. The vessel, which now has the capability of laying flexible pipe in depths up to 6,561 ft. (2,000 m), is the first contract being a charter with Brazil's Petrobras for work off the Brazilian coast.

Hanjin Heavy Industries Co. (HHIC) operates the Youngdo Shipyard in the Port of Pusan, the country's largest and busiest port. Although the main activity in this shipyard is newbuildings, two graving docks are given over to the repair market. The largest of these is a 150,000-dwt capacity drydock, which is dedicated solely to the repair market. Of course, a number of repair contracts come from Hanjin's shipowning division, Hanjin Shipping Co., which oper- ates a fleet of more than 45 containerships and bulk carriers.

Later this year, the company is to take delivery of its first LNG carrier, currently being built at the same yard. HEHI is currently bulding a new shipyard, Samho Shipyard in Mokpo. The smaller of the two building docks, which has a 500,000-dwt capacity, is being designated as a newbuilding/ship conversion dock. HEHI also currently operates a ship building/ repairing yard in Inchon, South Korea's second largest port, although the emphasis is mainly on newbuilding. It is expected that the Inchon facility will close when Samho becomes fully operational. The Inchon yard has a 40,000-dwt capacity floating dock, which is used foremost as a launching platform for newbuilding operations, and is only available for repair operations during a few days each month. The newbuilding section is currently busy, and repair operations take a backseat.

Another of South Korea's expanding ship repair facilities is DHI, Koje Island, which recently doubled its repair capacity following the purchase of a Panamax-sized floating dock from the Ukraine. DHI already operates a 120,000- dwt capacity floating dock.