South Korea to Fund LNG-Fueled Ship Construction

Credit: DSME
Credit: DSME

By The Maritime Executive 10-10-2018 08:18:00

South Korea's state-run Korea Ocean Business Corp. (KOBC) has announced $122 million in guarantees for local shipping companies to build LNG-fueled ships and to purchase other vessels.

The companies include Korea Line, SK Shipping, H-Line Shipping and Polaris Shipping, reports Yonhap News.

KOBC was established in July this year as part of the government's efforts to revive the nation's shipping and shipbuilding industry. On launching, it announced support for 10 small to medium shipping lines which included sale and lease back assistance for 10 vessels. The recipients include Daebo International Shipping, Dong-A Tanker and DM Shipping, and the financing is expected to be completed by November.

In September, Hyundai Merchant Marine (HMM) announced that it has placed firm orders for 20 eco-friendly container ships. The orders are divided evenly amongst South Korea's "Big Three" shipbuilders - Samsung Heavy Industries (five 23,000 TEU vessels), DSME (seven 23,000 TEU vessels) and Hyundai Heavy Industries (eight 14,000 TEU vessels). All will be delivered by mid-2021. 

HMM nearly went into bankruptcy in 2016, but is now recovering and expanding as a result of significant government support. Reports this week indicate that the shipping line will receive $5 billion to fund both the shipbuilding orders and also terminals.

South Korean shipyards are leading the global order book in September, for the fifth consecutive month, according to Clarkson Research Services. The nation's order backlog now exceeds 20 million compensated gross tonnage, with the nation's yards receiving 28 orders out of 75 globally in September. Competitor China won the second-largest amount, 17 orders.

Earlier this month, the government announced plans to build smart shipyards equipped with artificial intelligence (AI) technology in a move expected to boost the cost competitiveness of the nation's small to mid-size shipbuilders. 

BusinessKorea reported that the government will begin a feasibility study this year. Around $360 million will be spent on the Korean Smart Shipyard (K-Yard) project which aims to first develop a smart shipyard simulation model and set up a virtual reality-based production platform to track production flow using the internet of things. Two shipyards are expected to take part in testing between 2020 and 2025. The production models developed would then be rolled out across other yards.

The government is specifically planning to win back the mid-size bulk and tanker markets from China, reported BusinessKorea, and hopes to increase productivity by 20 percent and lower production costs by 10 percent with the project.