Strategies for Becoming a Shipping Powerhouse
Strategies for Becoming a Shipping Powerhouse
The Ministry of Oceans and Fisheries of Korea (hereinafter referred to as “MOF”) has made its utmost efforts to swiftly recover the competitiveness of the Korean shipping sector which had fallen after the bankruptcy of Hanjin Shipping in February 2017. As part of its efforts, MOF established a five-year plan to rebuild the shipping industry in April, 2018, and launched the Korea Ocean Business Corporation (KOBC) in July, 2018. Thanks to such policy support placed well along with the improvement of the market conditions in shipping, major indexes of this year, such as shipping revenues and capacity of deep-sea container ships, are recovering fast to the level before Hanjin’s bankruptcy.
- * Shipping revenues (KRW trillion): 39 in 2015 → 29 in 2016 → 36 in 2020 → 40 in 2021 (Goal)
- ** Capacity of deep-sea container ships (10K TEU): 105 in Aug. 2016 → 46 in Dec. 2016 → 78 in Dec. 2020 → 105 in 2021 (Incl. capacity of new container ships to be built)
However, with changes in the shipping market, such as a surge in cargo volumes since the COVID-19 pandemic, and improvements in the market conditions, major global shipping lines have significantly increased new shipbuilding orders, leading to a much fiercer competition in the shipping sector. Also, it becomes imperative to enhance readiness to the international environmental restrictions and speed up carrying out innovation works, such as port automation, development of maritime autonomous surface ships (MASS), and digital transformation in logistics, in which we are lagging behind advanced countries.
Under the vision of “becoming a global shipping powerhouse by 2030,” first, MOF will focus on the development and improvement of its five-year plan of rebuilding the shipping industry by increasing new builds of highly efficient vessels, securing stable cargo volumes, and supporting small- and mid-size shipping lines for their business stability. And, secondly MOF will search for a future growth engine by accelerating the shift into securing eco-friendly ships, adopting smart shipping and logistics systems, and building supporting infrastructure. By doing so, MOF aims to reach the following goals by 2030: shipping revenues of over KRW 70 trillion; deep-sea container ships’ capacity of more than 1.5 million TEU; and over 140 million DWT controlled fleet.
Development and improvement of the five-year shipping reconstruction plan
(1) Increasing new and highly efficient vessels
MOF plans to increase shipbuilding orders, including orders of HMM for a dozen 13,000 TEU container ships, and support ship finance by launching a newbuilding program where four institutions, including the Korea Development Bank (KDI), the Export-Import Bank of Korea (KEXIM), the Korean Asset Management Corporation (KAMCO), and KOBC, are engaged so that national shipping lines can timely secure vessels and build a low cost structure not to be affected by market changes.
(2) Securing stable cargo volumes
MOF will support the shipping sector to overcome crisis in import and export logistics services through cooperation for a shared growth between shipowners and shippers and lay a solid foundation for stable cargo transport by encouraging long-term shipping contracts.
MOF plans to encourage signing long-term shipping contracts where small- and mid-size shippers can enjoy shipping services at a low cost and to boost logistics competitiveness by securing domestic and international competitive logistics facilities, such as port terminals, and attracting cutting-edge tech firms to hinterlands, which will ultimately create new cargo volumes.
(3) Supporting business stability
KOBC will first push ahead with leasing major operating assets to shipping lines under operating lease (BBC) as a pilot project so that they can face less financial burdens when acquiring such assets as vessels and container boxes. Though such program, the so-called “the Korean version of a tonnage provider,” KOBC will lease 50 vessels maximum by 2025 and extend the candidate for its container box leasing program to short-sea container shipping lines.
Also, new guarantee programs, including credit guarantee programs of KOBC, will support shipping lines to secure their operating capital.
Searching for a future growth engine
(1) Accelerating the transition to securing eco-friendly ships
MOF will accelerate the shift into securing eco-friendly ships by setting a full cycle of the framework, starting from developing and demonstrating new technology to securing infrastructure for fuel supply to provision and expansion. First, MOF will help to develop technology with the goal of promoting the use of zero-carbon vessels by 2050 (KRW 254 bil. from 2022 to 2031). Secondly, MOF will transform 528 ships into eco-friendly ships by providing tailored support for each vessel type by 2030, increasing the share of eco-friendly ships up to 15% in Korea.
(2) Introducing smart shipping and logistics system
In order to bridge the gap in smart logistics technology with advanced countries, MOF pushes ahead with developing technologies, related to port automation, MASS, and transport optimization in logistics.
First, MOF will set up a test bed for port automation in Gwangyang Port till 2026, and based on the outcome, it will introduce automation systems in new ports, including Busan Port and Jinhae New Port.
In addition to developing MASS, which can boost navigation efficiency (KRW 160.3 bil. from 2020 to 2025), MOF plans to preemptively reorganize its rules and regulations in response to a broader use of MASS. And, it will promote technological development to optimize the entire transport process of logistics by connecting data from ship to port and to shore.
(3) Building supporting infrastructure
MOF has raised extra funds so that KOBC can constantly perform its role of supporting national shipping lines.
Furthermore, developing and advancing freight rate indexes which reflect the national situations and designing models to forecast prices of second-hand vessels and fuel oil will be carried out mainly by KOBC so that the shipping lines can enhance their capability to respond to market changes.