From 33% in 2020 to 10% last year, South Korea’s decline calls for urgent action

China’s aggressive low-cost strategy has significantly impacted South Korea’s position in the global shipbuilding market, causing its market share to plummet to 10%. This shift has raised concerns about South Korea’s future competitiveness in the industry, with calls for substantial investments to avoid missing the critical window of opportunity.

According to a report by the Korea Eximbank Overseas Economic Research Institute titled “Current Status and Implications of Large Ship Orders in Korea’s Shipbuilding Industry,” released on Jan. 6, South Korea’s global new shipbuilding order market share, measured in standardized cargo ship tonnage, recorded 18% from January to November last year. This is a stark decline from the 33% market share in 2020, which fell to 32% in 2021 and 2022, 21% in 2023, and further dropped to the 10% range last year.

In contrast, China’s market share has seen a dramatic increase. From 44% in 2020, China’s share surged to 51% in 2021, 52% in 2022, 59% in 2023, and reached 69% last year, nearing 70%. Japan, which once formed a three-power system with South Korea and China, saw its market share drop to a mere 5% last year.

The decline in South Korea’s market share is largely attributed to China’s near-total domination of the large tanker and container ship sectors. These ship types, along with LNG carriers, are crucial for the performance of domestic shipbuilders. South Korea, which once held a monopoly position in the ultra-large container ship design, saw its market share overtaken by China in 2021 and has not secured a single order since then.

The report highlights that while South Korea maintained an emergency management system, including workforce restructuring during the industry’s downturn, China made large-scale investments to improve technology and production capacity under national strategies like “Made in China 2025.” This strategic investment has led to recent changes in order market share. The report advises that as the price gap between South Korean and Chinese products remains, but the quality gap is narrowing, South Korea should enhance its competitiveness through investments that provide value equivalent to the price difference.

Yang Jong-seo, a senior researcher at the Korea Eximbank Overseas Economic Research Institute, emphasized the need for strategic investments. “As the financial situation of domestic shipbuilders is expected to improve for at least the next three years, there is still an opportunity to counter China’s competition,” he said. “It is necessary to strengthen competitiveness by increasing investments in technology development in areas with high innovation demands in the ship market, such as eco-friendliness and smart technology.”

Source : Businesskorea