Troubled Shippers Face Downsizing
By Kim Tae-gyu
Staff Reporter
Following construction and shipbuilding businesses, the shipping industry will go through wide-ranging restructuring in the midst of the lingering financial crisis.
The Financial Services Commission (FSC), Korea's top financial policymaker, said Thursday that banks will head the restructuring in early May.
``Plunging fares have cornered domestic shippers and things are not likely to improve, as supply simply outstrips demand,'' FSC Secretary General Kwon Hyouk-se told a press conference.
``In this climate, we plan to encourage creditor banks to wrap up their assessment of large-sized shippers by early May in order to decide which will be restructured,'' Kwon said.
Included in the large-sized players are those with debt standing at more than 50 billion won. A total of 37 out of 177 shipping companies meet the criteria.
Originally, banks were supposed to finish the review on shippers by the end of June but the FSC hopes to speed up the process by about two months.
``The embattled shipping industry may negatively affect other businesses of shipbuilders or financial outfits. Hence, preemptive steps are necessary,'' Kwon said.
As one of the major measure, the FSC plans to create a fund that will buy vessels from flagging shippers.
``During the Asian currency crisis 10 years ago, many of our firms sold off vessels at a beaten-down price to survive and bought back them at higher prices when the economy recovered,'' Kwon said.
``We will prevent such forced disposal by creating demand for the vessels on sales. A fund will take charge of the tasks, although it is up to the marine transporters whether or not to sell ships,'' he said.
Kwon said that the FSC has yet to finalize how the government will purchase the vessels. But he noted state-run KAMCO or Korea Development Bank could do so.
The FSC will not announce the results of the assessment on the shippers on fears that marginal entities may not be able to receive orders if they are known to be embittered.
The country's shipping business has exploded over the past few years as the number of marine transporters has jumped from 73 in 2004 to 177 as of the end of last year.
The number of vessels also rocketed over the same period thanks to brisk exports, from 471 to 819. Exports amount to up to half of the country's gross domestic product (GDP).
Yet, the global financial distress held back the flourishing industry. In particular, plummeting exports of Asia's fourth-largest economy wreaked havoc on them.
For example, exports dipped 33.8 percent in January from a year ago. The year-on-year decline somewhat slowed down last month but remained at 17.1 percent.