During the May Day holiday, a piece of news attracted a lot of attention: the Chinese Navy's Fujian aircraft carrier conducted its first sea trials and achieved success.
As the third aircraft carrier of the mainland navy, the Fujian ship adopts the black technology of electromagnetic catapult and several phased array radars, which proves that China has firmly established itself with the world's first echelon in the field of ships.
Today's talk is about shipbuilding, but instead of warships, civilian ships. The country we are talking about today is not China, but our neighbor South Korea, which is separated by the Bohai Bay.
As we all know, South Korea's shipbuilding industry is second to none in the world, and large shipbuilding companies led by Samsung even monopolized more than 70% of the global shipbuilding market share for a time.
However, in recent years, with the slowdown of South Korea's economic development and the industrial base can no longer support the current development of the shipbuilding industry, the position of the Korean shipbuilding industry in the world market has gradually been overtaken by China.
The South Korean government is also anxious when it sees this kind of thing, and they are not willing to give up the position of the leading leader in the shipbuilding market to China.
As a result, the Korean shipbuilding group and the South Korean government began to think of ways to work on the LNG project.
What is LNG? This is short for LNG ship. The rapid development of today's world is due to the inexhaustible energy behind it, and coal, oil and natural gas energy resources are not only transported through pipelines, but also by cargo ships.
South Korea has also been leading the way in LNG construction. Therefore, South Korea is preparing for an LNG project as a breakthrough and plans to fight a turnaround battle in the shipbuilding industry. But the ideal is very plump, and the reality is very skinny.
South Korea's so-called turnaround in LNG projects turned out to be that South Korea undertook the project and then used foreign labor and imported materials for processing, and the South Korean government was heavily subsidizing. In this way, they tried to save the increasingly decadent Korean shipbuilding industry.
First, the strength of South Korea's shipbuilding industry is relatively declining
From the perspective of international proportion, South Korea's shipbuilding industry has maintained a uniform development. Why is the relative decline in strength? In fact, this refers to the relative decline in the market size occupied by Korean shipbuilders.
Because the world's shipbuilding enterprises are no longer only South Korea's dominant situation, China, as a rising star in the field of shipbuilding, has a tendency to catch up with South Korea, and in some areas has surpassed South Korea.
According to the statistics of Western professional institutions, global shipbuilding orders will reach 41.49 million CGT in 2023, a decrease of 18.7% from 2022. Among them, China accounted for 24.46 million CGT, accounting for 59% of the total. South Korea has 10.01 million CGT, accounting for 24% of the total.
The distribution of the performance of the entire shipbuilding industry in the world can be seen very clearly, and the volume of related shipbuilding in China has greatly exceeded that of South Korea.
Although South Korea has lost its leading position, its shipbuilding strength should not be underestimated.
Especially in LNG manufacturing, South Korea still has a leading market share. In the world LNG manufacturing market in 2023, South Korea alone will account for 80% of it, and the remaining 20% of orders will be mostly occupied by China.
Even so, there is still a lot of dissatisfaction with the decline of the country's shipbuilding industry in the large international shipbuilding market. South Korean media reported that orders for the South Korean shipbuilding industry in 2023 fell by as much as 37% compared to previous years.
Although the objective factor is that more and more domestic shipbuilding orders in China have begun to seek cooperation with China's local shipbuilding industry. But even this cannot hide the trend of the sunset in the Korean shipbuilding industry.
South Korea's shipbuilding technology, strength and market share are relatively low compared to China's.
This is not only reflected in the market share, but also in the influence of the shipbuilding industry of the two countries.
On the whole, as China's economy becomes stronger and the South Korean economy becomes more and more depressed, the shipbuilding industry of the two countries will also adapt to the level of economic development.
However, there is one thing that needs to be noted here. If the shipbuilding capacity of one company is one company, South Korea can steadily occupy about six of the top 10 shipbuilding companies in the world, and the top two must be Korean-related companies.
Sharing this ranking means that although the strength of the mainland's shipbuilding industry has greatly increased, the strength of South Korea's shipbuilding industry has declined relatively.
However, South Korea's influence and strength in related manufacturing fields should not be underestimated.
2. Why is South Korea's shipbuilding industry no longer in the limelight?
There are many factors that affect South Korea's shipbuilding industry, such as South Korea's economic development, the strength of its industrial base, domestic and foreign political factors, and international turbulence and changes.
1. The state of the domestic economy in South Korea
The economy is the foundation of a country, and there are deep-seated material motives behind everything. Behind the decline of South Korea's shipbuilding industry is also a side reaction to South Korea's economy, and South Korea, one of the four Asian tigers, is no longer beautiful.
In the 2023 ranking of GDP of the world, South Korea ranks 14th in the world with 1,712.8 billion US dollars. Although it is not in the top ten, the trillion-dollar economy is also in the second echelon.
"The growth rate of South Korea's domestic economy is really worrying." This is not our own evaluation, but the evaluation of the Korean economy by economists in Korea. He said this because the South Korean government lowered its economic growth forecast of 4.6% again.
Although there is no direct connection between a country's economy and an industry such as shipbuilding, he can also reflect many problems from the side.
The state of the domestic economy, the living conditions of the people, and the development of various industries will be affected to a greater or lesser extent.
2. The industrial base is relatively weak and cannot meet the current market demand
Take the LNG shipbuilding project heavily subsidized by the South Korean government as an example, the South Korean shipbuilding company auctioned the LNG shipbuilding project at a price significantly lower than the market, but how to make up for the multi-billion dollar hole in the later stage? That's a problem.
As a result, Korean companies have reduced manufacturing costs through human resource outsourcing and shipbuilding parts outsourcing.
The practice of Korean shipbuilding companies also reflects the reality of high manufacturing costs in the Korean shipbuilding industry today.
It is an indisputable fact that the labor cost is high and the local parts are high, and the corresponding shipbuilding prices will naturally rise. The high cost of these foundations is also an important basis for South Korea's weak industrial base and lack of relative strength.
Some people see that this is a bit blind, what does this mean? In layman's terms, South Korea's manufacturing industry relies on imports of raw materials in addition to their technology, which directly leads to soaring costs.
China has the world's only industry-wide technology category certified by the United Nations, and also has considerable resource reserves. Therefore, we have an absolute competitive advantage in shipbuilding, photovoltaic power generation and other fields.
This is also the reason why Made in China and Chinese shipbuilding are increasingly able to meet the needs of the market.
3. The demand for shipbuilding in the international market has decreased, and the development has been limited
This is from the international background, the shipbuilding in the international market has declined relatively much, and the demand for ocean-going cargo ships in various countries has decreased. We also cited relevant data above to prove this: world shipbuilding orders fell by 18.7%.
There are many reasons for the decrease in national ship orders: rising international oil prices, international environmental impact, and financial constraints of various countries and enterprises after the epidemic have all affected the orders of the global shipbuilding industry.
What is the most expensive ocean voyage? That is the fuel consumption of the ship. It is not something we can imagine that millions of fuel consumption can be achieved at a time, and the impact of international oil price fluctuations on them can be seen.
Regional tensions will also have an impact on it, such as the tension in the Red Sea and other relevant waters in the Middle East some time ago, and many cargo ships can only detour through the Cape of Good Hope in southern Africa. This time millions of oil were consumed again.
The superposition of these factors has led to a relative decline in the number of ship orders in the national market, and South Korea's proud shipbuilding industry has naturally been implicated.
3. What has South Korea done to maintain its shipbuilding industry?
In order to preserve South Korea's shipbuilding industry, South Korean companies and the government are working hard. Especially in LNG manufacturing, South Korea has firmly controlled the few "fat" in its mouth.
However, in the past, LNG shipbuilding was indeed a piece of fat, but now this piece of fat has become a "chicken rib" for Koreans. Chicken ribs, chicken ribs, tasteless food, and it is a pity to abandon it.
So how did the LNG manufacturing projects that used to make a lot of money become chicken ribs now? This is because South Korean companies and the government are doing everything they can to control their so-called market share.
They would rather lose money than take a large share of the LNG market, which makes them have to find a way elsewhere. Samsung's shipbuilding company came up with a way to start with labor and manufacturing materials.
Because labor is extremely expensive in Korea, materials related to shipbuilding are also very expensive. The Korean company simply outsourced the labor and chose to import the materials. Coincidentally, the outsourced labor and imported materials all came from China.
This is because there is no other country in the world other than China that can provide workers and material companies to South Korea with corresponding supplies.
So it's not so much a Korean-built ship as a ship built by a Chinese company dressed in South Korea. Because from the perspective of labor and construction materials, all are "Made in China".
Let's talk about the South Korean government, they know that South Korean companies are trading at a loss.
However, they still support the development of their own enterprises as always, and even carry out a large amount of financial subsidies behind the scenes.
And the purpose of South Korean companies and the government is nothing more than to save the last face of South Korea's shipbuilding industry.
epilogue
The development of things is regular, and there is a high probability of success if you follow its development, and if you go against it, you are doomed to failure. South Korea's shipbuilding industry, which relies on project outsourcing and government subsidies to survive, I don't know how long it can last?
Without a strong economic strength and industrial base, the decline of South Korea's shipbuilding industry is a matter of time. In the face of this fact, if the relevant companies and governments in South Korea want to remedy the situation, it is best to find cooperation and find another way out.
Instead of doing business here at a loss all the time, choose to die. South Korea's economy is so big, although hundreds of millions of dollars or even billions of dollars are acceptable to South Korea. But what about in the long run?
In other words, the Chinese government has no mercy and has not appealed the relevant actions of the South Korean government and enterprises to the WTO, nor has it chosen sanctions for such vicious competition. If it were the United States, I am afraid that it would have launched a "301" investigation against South Korean shipbuilders a long time ago.
Resources:
http://tv.cctv.com/2015/09/21/VIDE1442818439736445.shtml (Asia Connection: South Korea's shipbuilding industry is in deep crisis)
https://tech.ifeng.com/c/8W4cZcPHTQE (Phoenix.com: South Korea's shipbuilding industry was first taken away by China)