Maritime Trade and Transport - HWWI

dern technologies, and a productive component supplier industry in the immediate vicinity of
the shipyards. Japan has dedicated itself to building bulk freighters for the domestic market, as
well as oil and gas tankers. In container ships, it is gradually losing market shares to South
Korea. Japan’s shipbuilding industry is currently undergoing a transformation process.
The result will be a greater degree of automation in production, lower building capacities,
and shipyard mergers. In 1976, following the first oil crisis, the inflated shipbuilding market
began to collapse. Within three years, demand and production were cut in half and prices fell
steeply. Rationalization, nationalization and subsidies became the buzzwords of the era. At the
same time, South Korea developed into a new competitor. In 1970, this country had practically
no shipbuilding industry, and 20 years later it had outstripped all of the European countries.
While low demand forced Europe and Japan to cut back on capacities in the 1980s, South
Korea erected new building berths as the foundations for its world market supremacy. With -
out massive cash injections by the state and advantageous financing terms, this would not
have been possible.
The much desired upswing in the demand for ships began to emerge in the early 1990s.
Asia’s large shipyards profited especially from this positive impetus. The trend toward series
shipbuilding reduced planning and development costs, and it enabled economies of scale and
a steep learning curve. Contrary to expectations, the profitability of the shipyards did not
improve. Despite rising demand, the prices for new ships sank. The need for replacements for
the ships that had been built during the boom of the 1970s had been predicted. South Korea
prepared by amassing enormous capacities, Japan reactivated plants that had been shut down,
and China entered the market. The Asian crisis of 1998 had dramatic consequences for South
Korea’s export-oriented shipbuilding sector. Currency effects alter the profitability of shipyards
considerably, since ships are priced and invoiced in U.S. dollars. The depreciation of the won
thus abruptly doubled profits from delivered ships and permitted the shipyards to substantially
reduce their prices for new vessels. The deluge of orders caused Korea’s world market share
to skyrocket from 25% (1998) to 36% (2000). The downside was the rise in cost for labor and
raw materials. Many of the shipyards that were seriously in debt became overextended. To
utilize capacities, they began to offer new ships under cost. The resulting legal action filed by
the EU with the WTO was rejected last year. It became evident that the WTO regulations do
not effectively combat unfair pricing practices. South Korea now specializes in large tonnages,
primarily container ships and products tankers, as well as technologically sophisticated LNG
tankers. Its goal is to gain market shares in more profitable segments, such as passenger shipping.
South Korea’s shipbuilding industry is dominated by five major shipyards, which command
72% of the Bloomberg World Shipbuilding Index. 45
45 See Nonstop (2005a), Heseler (2000).
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