The South Korean announcement about prospective newbuilding orders for up to 200 vessels at South Korean shipyards is very intriguing, and one may certainly speculate about the motivation for such a move.
It is fair to say that Korea has gone through a challenging period of late – both in the shipping and political arena. Having seen the nation’s largest shipping company (Hanjin Shipping) go bankrupt, and more recently, the former president (Ms Park Geun-hye) jailed for 24 years on corruption charges, these could be interpreted as something of a national embarrassment. A desire to move on, to place things on to a more positive footing and to consign previous mistakes to history is understandable. That said, whether building 200 vessels is the correct tonic is debatable. The case for such an order has yet to be established.
If South Korea’s HMM, for example, wishes to cement their position as the new national carrier, able to compete with the bigger players, then building more containerships, fit for purpose in the new regulatory/economic environment, is a strategy that may withstand scrutiny. Indeed, HMM have just announced that they are going to build 6 x 14,000TEU vessels and 14 x 20,000TEU vessels. It is unclear whether these orders are part of the national plan announced by the South Korean government. If they are not, then that would mean another 40 container vessels yet to be ordered. Irrespective of the fact that the government will offer assistance to small and medium-sized owners to place such orders, one wonders whether there will be many takers unless it’s combined with the prospect of long-term employment for these new vessels. Bear in mind that recovery in the global liner sector continues, but remains fragile.
The desire to restore Korean national pride in the shipping sector (supply side) should probably be tempered with a more detailed analysis of the demand side in order to avoid situations like the Hanjin episode being repeated again in the future.