A Hanjin Heavy shipyard in Korea
The shipbuilding industry accounts for 1.7 percent of the Korean GDP and a whopping 13 percent of its exports – yet since the economic crisis began in 2008 it’s been sinking into the murky depths. Not only have new orders continued to decline, but existing orders in Korean shipbuilders’ once-endless backlogs have been cancelled as shipping lines find themselves frantically struggling with a plunge in demand. Analysts say the industry still has a tough path ahead.
“There is a high chance of more cancellations, or postponements, of ship orders this year,” said a researcher at the Hana Institute of Finance. “The biggest difficulty the shipbuilders face is the lack of new orders. Shipping companies in France and Germany are seeking financial aid, but some of them have not been very successful.” A side effect of the excess capacity is that prices have plummeted, which ironically makes it an excellent time for shipping lines to buy new vessels, he said. But most suffer from insufficient liquidity. “Even if shipping companies want to buy ships, banks are not lending any money,” he said.