South Korea's Shipbuilders to Cut Thousands of Jobs

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By MarEx 2017-01-14 16:58:45

South Korea's Big Three shipbuilders plan to shed at least 4,000 more jobs in 2017, Yonhap reports, in a continuation of last years’ downward trend.

Daewoo Shipbuilding and Marine Engineering will lead the way, slashing 2,000 positions on top of the 2,000 jobs it eliminated last year. Samsung Heavy Industries plans to reduce head count by 1,800. The third and largest Korean shipbuilder, Hyundai Heavy Industries, has not yet finalized its staff reduction plans for 2017. 

In addition, thousands of contractors at DSME alone may be dismissed as the firm completes its offshore facility backlog. Sources told Yonhap that DSME has six offshore plants due for delivery in 2017, and that their construction employs over 5,000 people – the majority of whom are hired in as contract workers. As DSME has few new orders for offshore facilities, these workers may be laid off as each existing project is completed. 

While the Big Three are reducing overhead, they are still expected to face financial challenges. DSME, the most troubled yard, has a high debt to equity ratio and faces liquidity issues: it posted a loss of roughly $1 billion in the first half of 2016 and it has about $850 million in debt coming due next year. It recently received support totaling to $2.4 billion from its main creditors, KDB and Eximbank, but some analysts think this will be insufficient given the dearth of new orders. 

China aims for more shipbuilding market share

China, which builds more of the world's tonnage than any other nation, has been working hard to consolidate its excess shipyard capacity and to focus resources on its biggest and best facilities. It has created a "white list" of the nation’s top 50 shipbuilders, with membership linked to incentives programs, and it aims for the biggest ten shipbuilders to handle over 70 percent of the nation's orders by the end of the decade. 

However, consolidation at home does not mean that Chinese yards will abandon competition abroad: policymakers with the powerful Ministry of Industry and Information Technology called on Friday for Chinese yards to pursue a five percent increase in shipbuilding market share worldwide, with a focus on high-end vessels. In addition, MIIT encouraged Chinese yards to branch out abroad and to take advantage of "overseas mergers and acquisitions, investment and construction" – similar to the strategy pursued by South Korea's STX Offshore & Shipbuilding, which once had a presence in China and Europe but has been forced to sell its foreign holdings.