Stealing a Thunder

For as living memory has remained, Korea has been the place for new building orders. And now Seoul, is not letting up on its international shipbuilding prowess. The nation will be a hard act to follow.

Befitting its renowned status as a shipbuilding giant, Korean yards have shone again.

And that is despite the withering economic climate of 2020 that battered global economies and created unspeakable unemployment across the globe.

In news reports after reports, Korean yards reported colossal orders as if to suggest that the nation was operating in its very own shipbuilding universe, so to speak!

According to British shipbuilding and marine industry tracker Clarkson Research Services and quoted by Pulse News, Korean shipyards secured orders of 720,000 compensated gross tonnage (CGT) for 13 vessels in October 2020, taking home 69 percent of global orders. China came second with 250,000 CGTs for 11 ships (24 percent) and Finland with 30,000 CGTs for one (3 percent).

It is a startling figure, but one does not need to be bowled over by it because that is just what Korea does best almost without peers.

‘‘When Korea emerged as a shipbuilding country the world was attracted by its low cost coupled with Korean government promoting its research and innovation’ highlighted Jayendu Krishna to Marine and Offshore. Since then -presumably, in reference to the 1970s and 1980s – they have become proficient in merchant fleet design and building, bulk carriers, tankers, container, LNG etc, stressed Krishna, a director in Drewry Maritime Service in Singapore.

Just what makes the Koreans ace shipbuilding comes simply down to its entire ‘whole of government’ support.

In 2020 the Seoul government announced a massive cash injection of US700million funding to help modernise passenger and cargo ships. Shipping companies will be reimbursed for up to 60 percent of the cost of the new vessels, and South Korea’s state-run Korea Ocean Business Corp. will guarantee more than 95 percent of the loans. The Korea Development Bank will also fund 20 percent of the cost of vessels.

Yonhap News Agency reported that 58 smaller shipping companies operate 166 passenger vessels, including ferries, to transport about 15 million people a year between the South Korean mainland and its islands. 780 other shipping companies run 2,013 cargo ships on domestic routes.

Vessel safety, since the Sewol ferry disaster in 2014 which claimed more than 300 lives have seized and vexed the nation’s imagination like never before. As a result, the nation is lowering the maximum life of vehicle ferries to 25 years from its previous 30 years.

Technology is the buzzword

Yet what has set the nation apart is its technological prowess. According to the Organisation of Economic Cooperation and Development (OECD), ‘Technology and innovation have contributed to Korea’s ascent in the global shipbuilding industry. As it now faces increased competition in new and advanced technologies, and stricter safety and environmental standards, Korea is continuing to make efforts to maintain a superior technological edge over rivals through innovation and to develop high-tech, high-value-added and fuel-efficient vessels”.

What is seen as a semantic reprise of Krishna’s dictum, the OECD, points out that ‘Research & Development in the Korean shipbuilding industry has grown in recent years. In 2011, total R&D investment in the Korean shipbuilding industry was 74% higher than in 2005.6 In terms of R&D intensity, Korean shipbuilders were investing around 2% of value added in R&D activities in 2009 (Figure 7). Between 2001 and 2007, average R&D investment intensity was 2.6% in Korea, compared to 3.9% in Germany, 2.5% in Norway and 1.9% in Japan’.

Unsurprisingly, Korea’s ‘thrust’ has been led by its ability to develop eco-friendly and fuel-saving smart vessels.

Hyundai Heavy Industries (HHI) introduced the world’s first smart ship in March 2011. The ship comes equipped with an autonomous navigation system which allows a shipping company to monitor the operation of a ship through a satellite. The technology was such a boon that orders just jumped for HHI. HHI also developed the Integrated Smart Ship Solution (ISS) based on Internet of Things (IOT) technology.

The company also installed “HiNAS” (Hyundai Intelligent Navigation Assistant System) thus, making it as the world’s first shipbuilder to apply a core technology for autonomous sailing to a large ship already in service.

HiNAS cachet is that it recognises surrounding vessels by camera analysis and determines and alerts the risk of collision based on augmented reality (AR). The advanced navigation support system is useful in times of poor visibility or when fog and inclement weather interferes. it can analyse and provide comprehensive information, such as the location and speed of obstacles, using infrared cameras.

HHI also developed HiMSEN Engine on its own. The engine is loaded with superior technologies such as artificial intelligence (AI), big data, and the IoT and can potentially shipowners billions of dollars in fuel costs.

Daewoo Shipbuilding & Marine Engineering (DSME) meanwhile, plans to develop high-efficiency ships by using carbon-free and smart technology. It has delivered to Hyundai Merchant Marine (HMM), a smart ship based on its own platform Smart Ship 4.0. Plans are also afoot to scale up technologies for navigational environment measurement, maintenance and repair and safe navigation.

And DSME does not plan to just stop there. It is also planning to develop digital twin ships that sounds out risks before they happen and a power generation that produces electricity.

Picture from Getty Images shows a typical South Korean yard and some of its workers presumably taking a break from the heavy grind of work’.

Such feats did not just happen in a vacuum. They were and continue to be pioneered by a nation and a government bent on securing its foothold in the global shipbuilding market, and working in a symbiotic type partnership for the larger benefit of the nation.

Samsung Heavy Industries is busy developing eco-friendly technology to save fuel. It has an air lubrication system, one of energy saving devices (ESDs). In particular, the company applied its own air lubrication system, SAVER Air, to LNG carriers, reducing their energy use to 5 percent. In addition, it has improved fuel efficiency by about 3 percent by applying SAVER Stator-D, a fuel-saving device that increases propellers’ power by equalizing the flow of seawater into the propellers.

Nothing disguises the fact that shipbuilding is a national and security imperative in Korea. The high costs of shipbuilding have always been a huge drawback even for nations flushed with cash such as China.

In Korea, once shipbuilding companies are established, they are often cast as too big to fail, because they provide useful employment thus compelling the government to support unprofitable industries. Restructuring is extremely costly in Korea’s shipbuilding sector and specific capital stock has few alternative purposes. That makes the case for shipbuilding extraordinarily watertight.

What is just as crucial according to the OECD, is that the shipbuilding is part of a sophisticated marine cluster with upstream and downstream links as well as connections to other clusters including logistics and electronics. The shipbuilding value chain is composed of many different activities from design to post-sales, and the high degree of modularity in the industry means that production can be fragmented across different production units and, indeed, countries, in a global value chain.

One important domestic link is with the steel industry. Korea is the world’s sixth largest producer of steel, producing 66.1 million metric tonnes (mmt) in 2013 (or approximately 4% of global steel production) and employing 159 970 people in 2012. Shipbuilding has been a major driver of steel consumption in Korea, and in 2012 it accounted for 20.8% of the country’s total demand for steel, behind construction (28.1%) and automobiles (25.1).

With such huge dollops of aid, there really is no chasing Korea’s tail. What one can therefore do, is to walk in its shadows.