South Korea steps in to help ailing shipping sector
Image copyright AFP
South Korea has announced plans to support the country’s shipping industry as the sector is squeezed by a continuing slump in global trade. The government said it would establish a state-backed financing company worth 6.5tn won (£5.7bn; ?4.7bn) to help both shipping and ship building industries. Both sectors are suffering from a global downturn in international trade.
South Korea is home to the world’s largest shipyards and has been rocked by by the collapse of Hanjin Shipping. The country’s largest shipping line filed for receivership in August and since has become emblematic of the sector’s woes. Shares in Hanjin Shipping have jumped more than 26% on the news of the government’s decision to step in.
Globally, shipping is suffering from overcapacity and weak economic growth. “As an export economy, South Korea is heavily dependent on the shipping industry,” maritime trade analyst Greg Knowler told the BBC. “But slowing consumer demand has put the brakes on its export cargo volume.
Hanjin Shipping, its largest carrier is bankrupt, debt-ridden HMM is owned by Korea Development Bank, and the shipyards have seen orders all but vanish this year as domestic and foreign orders have dried up.”
According to the country’s trade ministry, orders for new ships have fallen by 87% compared with last year – a major hit for the country which is home to the world’s three biggest ship yards.
“The shipping industry in Korea is a huge employment provider, especially the ship yards where a single ship can require more than 1,200 workers,” Mr Knowler explained. “Pressure from the yards, carriers, ports and militant unions have made the government step in with today’s announcement.” The collapse of Hanjin Shipping was the the largest bankruptcy to hit the shipping industry and affected global supply chains.
Before faltering, Hanjin was the world’s seventh-largest container company but had been unprofitable for four of the past five years. The drought in the shipping industry is putting pressure on the industry worldwide. On Monday, three of Japan’s biggest shipping companies announced plans to merge their container operations to become more efficient.
The joint venture of Nippon Yusen, Mitsui O.S.K.
Lines and Kawasaki Kisen Kaisha would hold about 7% of the world shipping market.
- ^ collapse of Hanjin Shipping (www.bbc.co.uk)
- ^ filed for receivership in August (www.bbc.co.uk)
- ^ ‘We don’t have a future’ – Hanjin crews return to uncertain fate (www.bbc.co.uk)
- ^ The strange story of a seized ship and its lonely crew (www.bbc.co.uk)
- ^ Hanjin ships, cargo and sailors stranded at sea (www.bbc.co.uk)
- ^ merge their container operations (www.bbc.co.uk)