South Korea’s LNG carrier orders rise, but lack of workers
South Korea’s shipbuilding industry is struggling with labor shortages. South Korea’s shipbuilding industry has seen a surge in orders for liquefied natural gas (LNG) carriers due to the aftermath of the Ukrainian crisis. On the other hand, the halving of personnel during the recession has led to a shortage of technicians responsible for construction. In order to make up for foreign labor, the South Korean government will speed up its support through measures such as relaxing work visa conditions, but if construction continues to stagnate, it may give rival Chinese companies further opportunities for development.
“Despite the increase in the number of orders in the shipbuilding industry, the problem of brain drain and lack of recruitment is serious,” the South Korean Ministry of Justice announced on April 19, revising the guidelines for “special activity visas” issued to talents with specific skills. to be implemented. Relax the limit on the number of welders and paint workers necessary for shipbuilding, raising the limit to about 5 times the previous 4,400 people.
In South Korea’s shipbuilding industry, there are many workers from Southeast Asia such as Vietnam, Thailand and the Philippines. The South Korean government will keep the door open to secure the workforce when virus restrictions are eased.
It is rare for the government to relax visa conditions for thousands of people targeting specific industries. South Korea has three world giants, Hyundai Heavy Industries Group, the world’s second largest shipbuilding company, Samsung Heavy Industries, the third largest, and Daewoo Shipbuilding & Marine, the fourth largest. This measure was taken because of strong demands from the shipbuilding industry. An executive of a large shipbuilding company said, “It is impossible to cope with the increase in orders with the current personnel system. It is hoped that the relaxation of visa measures will help alleviate the labor shortage.”
Behind the current apparent labor shortage is a rapid increase in orders from 2021. Statistics from Clarksons Research, a British research firm, show that global ship orders in 2021 will double from 2020. Statistics from the Ministry of Industry, Trade and Energy of Korea show that domestic companies’ orders for ships reached US$43.9 billion that year, the highest level in eight years. Compared with 2020, it has increased by 2.3 times, and it has also increased by 93% compared with 2019 before the epidemic.
It will still maintain a strong momentum into 2022. In particular, South Korean companies hold about 90% of the LNG carriers, and they have received orders for 37 ships from January to March alone, equivalent to half of the orders in 2021. Shipyards at various shipyards are said to have already lined up ships to be built by 2024.
Shares are also on the rise. The stock price of Hyundai Heavy Industries has risen by 51% from the end of 2021. Samsung Heavy Industries and Daewoo Shipbuilding also bucked the trend against the background of the overall decline in the stock market after Russia’s attack on Ukraine, and the market is full of expectations.
The rise in orders for LNG carriers is largely the result of the Ukraine crisis. 40% of Europe’s natural gas depends on Russia. Amid tensions in Ukraine in the second half of 2021, European countries are looking to reduce imports from Russia via pipeline and instead import by sea from the Middle East and Southeast Asia. Shipping companies betting on this trend have increased orders for LNG carriers.
But the talent made sure that it didn’t keep up with the growth in orders. From the point of view of the shipbuilding process, there are many processes that are difficult to automate, such as the installation of equipment in the ship, and a certain amount of labor must be secured.
Large companies carried out mass layoffs in the mid-2010s during the shipbuilding slump. Statistics from industry groups show that the workforce, which reached about 200,000 in 2014, will be reduced to about 90,000 in 2021, a 54% reduction in seven years.
Also, in South Korea, where wages are rising, centered on high-yield high-tech industries such as semiconductors, the Internet and gaming, shipbuilding is seen as a relatively unpopular industry. In addition, shipyards are also concentrated in the southeast far from the capital Seoul, making it difficult to attract young Koreans.
Affected by loss-making orders and delivery delays during the recession, various shipping companies are plagued by low returns. Coupled with the rise in the price of raw materials such as steel plates, the three major shipbuilding giants will jointly experience operating losses in 2021. Due to the sluggish performance, the investment capacity of shipping companies is limited, and the production equipment is also aging. It is expected that it will take a long time for the increase in orders to be reflected in the performance.
Currently, South Korea’s shipbuilding industry is boiling over with an increase in orders, having previously been under attack from Chinese companies. In the shipbuilding industry, where China, Japan and South Korea share most of the global share, South Korea overtook Japan to take the top spot in the 2000s. But after entering the 2010s, Chinese companies seized the strong domestic demand and launched a low-price offensive abroad to achieve a rise. During this period, South Korean companies were quickly surpassed by China Shipbuilding Corporation (CSSC), giving up the first place.
Chinese companies such as China State Shipbuilding Corporation have accumulated construction technology in the field of dry bulk carriers and container ships, and will also strive for orders for LNG ships that test their technical strength. Qatar State Energy Corporation plans to buy more than 100 LNG ships, and three South Korean shipping companies and China Shipbuilding Corporation appear in the list of bidders.