Gyeongnam’s shipbuilding industry has experienced a resurgence in 2024, bolstered by government support and a recovering global market. However, the industry continues to face challenges such as high exchange rates and growing competition from Chinese shipbuilders.
Gyeongnam, a province in South Korea, has seen a positive turnaround in its shipbuilding sector this year. With the global shipbuilding market showing signs of recovery, local shipbuilders, especially small and medium-sized enterprises (SMEs), have benefited significantly. Government initiatives, such as the provision of refund guarantees (RG), have played a crucial role in supporting these companies.
The RG program, backed by both regional and national banks, has helped shipbuilders secure contracts and improve their financial stability. For instance, Gyeongnam Bank provided a substantial RG to Keisung Corporation last year, and this year, commercial banks have joined in to offer similar support.
“The RG program has been a lifeline for small and medium-sized shipbuilders,” said a spokesperson from Keisung Corporation. “With both regional and commercial banks providing this support, we feel more secure.”
The positive impact of these measures is evident in the improved financial performance of shipbuilders. Keisung Corporation, for example, reported a 20% increase in sales and turned a profit in the third quarter of this year. The company's order backlog also grew significantly.
While the outlook for the shipbuilding industry appears promising, challenges remain. The appreciation of the South Korean won against major currencies, particularly the US dollar, has increased production costs and reduced the competitiveness of South Korean shipbuilders in the global market. Additionally, the rapid technological advancements of Chinese shipbuilders pose a growing threat to South Korea's dominance in certain segments of the market.
“The shipbuilding industry is highly sensitive to exchange rate fluctuations,” said an official from a local shipbuilding company. “A prolonged period of high exchange rates could erode our profit margins and make it difficult to compete with foreign rivals.”
The South Korean government has pledged to continue supporting the shipbuilding industry, particularly small and medium-sized enterprises. However, industry experts warn that more needs to be done to address the challenges posed by China's growing shipbuilding capabilities.
"While South Korea has focused on high-value-added vessels like LNG carriers, China has been aggressively pursuing market share in the lower-end segment," said an official from the Gyeongnam Shipbuilding Equipment Cooperative. "We need to ensure that our policies not only support large shipbuilders but also strengthen the competitiveness of our SMEs and the equipment supply chain."
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