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7. Reconstruction of Shipbuilding Sector

2016-12-29

Reconstruction of Shipbuilding Sector

The government pursued preemptive and active restructuring this year to boost the overall competitiveness of industries. However, despite the efforts, the government was hit hard by the collapse of Hanjin Shipping, South Korea’s largest and the world’s seventh biggest shipping firm.

Shipbuilding and shipping companies were facing a crisis due to a serious lack of liquidity. Shipping companies were devastated by a drop in the volume of world trade while shipbuilders suffered from an oversupply in the global market.

The government sought to lessen damages that could result from restructuring efforts, including creating an eleven trillion won recapitalization fund. However, despite such endeavors for a soft landing, Hanjin Shipping filed for court receivership at the end of August, sharply upsetting not only domestic but global shipping industries. A global logistics crisis ensued and South Korean shipping firms suffered major losses.

The chaos settled down three months after Hanjin filed for court receivership when 141 of its container ships finished unloading their cargo.

Hanjin Shipping virtually began to take steps for liquidation after it was deemed the best option.

Shipbuilders also saw their share of hardships with restructuring. The nation’s top three shipbuilders — Daewoo Shipbuilding and Marine Engineering, Hyundai Heavy Industries and Samsung Heavy Industries — implemented self-rescue plans, including selling shares, reducing the number of dockyards and cutting personnel by 30 percent.

In that process, a large number of people lost their jobs. More than six-thousand employees of the top three shipbuilders applied for voluntary retirement. When counting the employees of partner companies of the three firms, tens of thousands are estimated to have lost their jobs.