29-12-2016

FSC denies mergers between shipbuilders

shipbuilders

Financial Services Commission (FSC) Chairman Yim Jong-yong affirmed there will be no mergers between shipbuilders in order to hold onto the country’s status as a shipbuilding powerhouse.

During a luncheon with reporters on Tuesday, Yim stressed the importance of keeping Daewoo Shipbuilding & Marine Engineering’s (DSME) status as the top shipbuilder in the world, refuting growing voices over the so-called “big deal,” dissolving the debt-ridden DSME and merging it into Hyundai Heavy Industries (HHI) and Samsung Heavy Industries (SHI).

“It is not a matter of artificially exerting influence,” Yim said. “Those big 3 companies are all under restructuring and a potential big deal will harm all of them. A precondition for a big deal is all of those companies undergo restructuring thoroughly and stand on their own. However, they are not in such a condition.”

DSME has been hit hard amid the government’s corporate restructuring sweep, as the company’s negligence in controlling its finances as well as alleged illegalities came to public light.

However, Yim said DSME’s competitiveness as the world’s top shipyard in terms of order backlog should be maintained. “It will be inappropriate for Korea to abandon an industry in which the country consolidates its status as No. 1 powerhouse,” he said.

“The government will not touch the R&D workforce, no matter how strongly it restructures the company. Those people are the best in the world and if they opt to go for companies from rival countries, Korea’s shipbuilding industry will face a serious crisis.”

Yim said the FSC came to the assumption that the global shipbuilding industry will recover in 2018, thus it has to keep DSME afloat, not dissolve it or let it go bankrupt.

In September, Clarksons Research reported that it expects the number of new ship orders worldwide to improve from 586 in 2016 to 1,322 in 2018. Also, the International Maritime Organization decided in September to set up tougher environmental regulations, which will spur ship owners to replace old vessels.

“By 2020, tougher environmental regulations will take effect. Given two or three years required for building a ship, orders will start increasing in the second half of 2017,” Yim said. “Experts, including Clarksons, say DSME should be maintained until 2018 at least, because there is a change in the small cycle.”

Though there were questions over the fairness of salvaging DSME while placing shipper Hanjin Shipping in court receivership, Yim said Hanjin has no choice but to go bankrupt because the company lacked the will to rescue itself and the shipping industry faces a positive outlook for its business conditions.

“In order to keep Hanjin alive, at least 4 trillion won ($3.3 billion) would have to be poured into the company,” Yim said. “However, Hanjin Group said it can only provide 500 billion won.”

Source: Korea Times

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