[UPDATE]South Korean shipyard workers make joint appeal for help

By Park Sae-jin Posted : April 7, 2016, 16:18 Updated : April 7, 2016, 16:36

[Courtesy of Daewoo Shipbuilding and Marine]


South Korean shipyard unions tossed away their traditional militancy Thursday, appealing for swift  state support to avoid massive layoffs as their yards become almost empty with no new orders coming.

A joint appeal came from the unions of Daewoo Shipbuilding & Marine Engineering, the world's second-largest shipbuilder, and Samsung Heavy Industries, South Korea's third-largest shipyard, both based on the southern island of Koje.

"We may see massive layoffs soon due to a sharp drop in the backlog of orders," the unions said in a joint statement, warning at least 20,000 part-time and contract-based workers may lose their jobs in the second half of this year only in Koje.

"From now, steps must be taken to avoid a catastrophe of unemployment before the situation gets uncontrollable," they said, demanding the government designate Koje as a "crisis" region.

The shipyard workers, known for their militant union activities, also want the government to designate shipbuilding as a "crisis" industry and keep it alive through a special bailout program.

A recent business survey conducted by the Korea Chamber of Commer and Industry found that up to 50,000 workers from South Korea's three major shipyards would be laid off in three years.

The three shipyards have 144,000 workers, including 91,000 hired temporarily or based on contracts.

Last month Daewoo Shipbuilding CEO Jung Sung-leep apologized for the company's record net loss of 5.13 trillion won (4.46 billion US dollars) last year. He promised to turn the company's troubled business around from the first quarter of this year.

Jung also envisioned the goal of achieving an annual operating profit of more than 500 billion won this year, compared with an operating loss of 5.5 trillion won in 2015, because the construction of offshore facilities will see a soft landing.

But his optimistic outlook faded after global researcher Clarkson Research Services reported this month that South Korean shipbuilders had an order backlog of 27.59 million compensated gross tons at the end of March, compared to China's 37.56 million tons.

In the first half of this year, South Korea yards secured a combined order to build only eight vessels, marking the lowest since the fourth quarter of 2001, with Daewoo and Samsung failing to clinch any new deals.

Hyundai Heavy Industries and other South Korean shipbuilders have been hit hard by a worldwide glut, weak demand and the global suspension of shipbuilding and offshore projects.

Their combined loss surged to 7.7 trillion won last year, but market watchers say their woes would continue this year.

Hyundai and Daewoo once adopted a discount policy to become the world's top shipyards by shoving aside Japan. But they have become the scapegoat of a similar strategy by Chinese competitors.

Meanwhile,  Japan is quickly regaining its previous strength as a result of consistent restructuring and technological innovation. Japan's Imabari Shipbuilding took over Samsung Heavy in terms of orders at the end of February.

Chinese shipbuilders have also improved their technological edge to produce reliable ships in the global market.

South Korean shipbuilders have shifted their strategy to focus on deep-sea drilling rigs and production facilities after the global financial crisis damped orders and Chinese shipyards out-priced them.

In January, however, Hyundai Heavy opted to temporarily shut one of its two factories for offshore facilities for three months, saying a slide in oil prices has caused a decline in new orders for facilities such as FPSO (Floating, Production, Storage and Offloading) units and oil rigs.

Aju News Lim Chang-won = cwlim34@ajunews.com
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