By Choi Sung-jin
Korean shipbuilders’ backlog of orders is rapidly dwindling to hit the lowest level in three years, industry sources said Tuesday. On the other hand, Chinese berths are sweeping up to 70 percent of the new orders to emerge as the world’s largest shipbuilder.
The Korean shipyards, given there will not be many new orders this year because of low oil prices and the global business slump, will likely have to undergo massive restructuring, sources said.
According to Clarksons, a British firm that researches shipping and shipbuilding industries, the global backlog of shipbuilding orders in January stood at 106.08 million compensated gross tonnage, down 3.65 million CGT from December.
By country, China had the largest backlog of orders with 38.74 million CGT, followed by Korea (29.13 million CGT), and Japan (22.51 million CGT). It is the first time since January 2013 that Korea’s backlog orders fell below 30 million CGT.
Backlog orders refer to orders to be filled, or the accumulation of work waiting to be done. As recently as three or four years ago, Korean shipyards had secured orders that could keep them busy for up to five years and complained of manpower shortages. Now, they have orders for just one or two years’ worth of work, and are faced with a surplus of manpower.
The nation’s big-three shipyards – Hyundai, Samsung and Daewoo – need to secure orders for at least three years of work to maintain stable operations, the sources said. “New shipbuilding orders are plunging across the world, pulling down the backlog orders, too,” said an industry executive. “The backlog orders, hovering below 30 million CGT, are sending a dangerous signal to local berths.”
In January, new global shipbuilding orders stopped at 450,000 CGT for 16 vessels, the lowest level since 280,000 CGT and 18 vessels in May 2009. Korean shipyards received no new orders last month, for the first time since September 2009. China won orders of 320,000 CGT for 10 vessels, taking up 71.6 percent of the monthly total. Japan won 20,000 CGT for one vessel.
Korea’s three largest shipbuilders have also been the world’s top three berths but are now driven to the wall as they incurred enormous losses in offshore plant business over the past couple of years. Chinese shipyards rapidly filled their void armed with abundant labor and low prices while the Japanese berths are taking away high value-added ships from their Korean competitors.
“While Korea’s big-three shipyards are mired with trillions of won in losses, Chinese berths are sweeping new orders worldwide,” the executive said. “As things stand now, a massive restructuring is inevitable for the shipbuilding workforce in Korea.”