SEOUL, Aug. 21 (Korea Bizwire) – The domestic shipbuilding industry was engulfed in a wave of low spirits as shipping publication “Tradewinds” and eBest Investment and Securities (eBest) both reported that French company CMA CGM had signed a letter of intent with two Chinese shipbuilding firms for nine container ships.
The reason for the Korean distress was that the major shipbuilding triumvirate of Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding and Marine Engineering had been involved in bidding for the French orders.
Depending on the specific build of the ship, Hudong-Zhonghua Shipbuilding will be tasked with building at least five, while Shanghai Waigaoqiao Shipbuilding will take care of the remainder of the order.
The maximum possible price of each ship will be 182.5 billion won (approximately 160 million dollars). Multiply that by nine and the maximum possible revenue from the ships would be 1.64 trillion won, or 1.44 billion dollars.
According to eBest, the reason why the Chinese firms came out ahead comes down to price.
“Once [the clients] decided on the ‘dual-fuel’ engine, the baseline price per ship was set to approximately 160 million dollars. The baseline price for a dual-fuel engine ship last year by South Korea’s Big 3 shipbuilders was 175 million dollars,” eBest explained.
Industry experts also suggested that the support from Chinese government in propping up its shipbuilding industry and CMA CGM’s ‘Ocean Alliance’ with Chinese shipping and logistics company COSCO also played a part in their selection.
The ordered cargo ships are some of the biggest of their kind at 22,000 TEU (twenty-foot equivalent unit, an inexact measurement of cargo space). The largest ship built domestically was 21,413 TEU by Samsung Heavy Industries last year.
Furthermore, being edged out of the opportunity to build ships implementing the latest in technology like the dual-fuel engine has experts wary of the Chinese shipbuilding industry’s rising prestige.
According to Clarksons, a British monitor of global shipping trends, South Korea (2.83 million compensated gross tonnage, 79 ships) ranked second behind China (2.90 million compensated gross tonnage, 133 ships) by a close margin last year. With this latest setback, the gap between the South Korean and the Chinese industry is expected to grow drastically.