The Rapid Rise of Korean Shipbuilding

in 1975 South Korea's ship production volume was just the sixth that of West Germany's 15 years later in 1990 South Korea put down more ships than all of Europe combined today Korea is one of the three countries dominated the world shipbuilding industry the other two being Japan and China ships are quite literally one of Korea's biggest export sectors right up there with cars and semiconductors in this video we're going to look at the rapid rise of South Korea's shipbuilding industry but first I want to remind you about the newsletter check out the newsletter to read the entire scripts for previously released videos including those you might not have seen before the sign up link is in the video description below I try to put one out every week maybe two alright back to the show at the start of the 1800s the United States was the world's shipbuilding leader this was because the world mostly sailed Wooden Ships and America has a lot of good wood starting in the 1850s this leadership position passed to the United Kingdom motivated by Naval contests with Holland plus Timber shortages after losing access to America's forests the British drifted towards metal ships for about a century up to World War II the UK made the best and most steel steam-powered ships in 1882 the UK had 80 percent of the world's shipbuilding Market the RMS Titanic my fourth favorite metal ship with the letter i in its name was built in the United Kingdom Belfast Harbor in Northern Ireland during World War II leadership passed to the Americans which utilized new welding Technologies to build faster than ever before from 1940 to 1945 America produced 90 of the world's ships after the war's end however leadership passed to the Japanese many of their ships were destroyed during the fighting with the country so dependent on overseas trade the Japanese government explicitly focused on replenishing their stock their efforts were encouraged by American economic recovery funds and the Korean war Japan eventually took over has the world's leading shipbuilding country by tonnage taking market share from the Western countries in 1974 Japanese shipbuilders took 40 share of the 28 370 ship orders placed that year and here is where the Koreans come into the picture the Korean people have built ships throughout their long history they kinda had to the country is surrounded by three C's on three sides and a big river on the fourth furthermore the country regularly grappled with the Chinese and Japanese for Naval power developing sophisticated fighting ships for the purpose throughout the chosan period Korea maintained a credible standing Naval Force for 500 years a remarkable feat the famous battle of myeongn in 1597 saw a small Korean floating Force to feed a much larger invading Japanese Navy the victory immortalizing Korea's highest grossing movie The Admiral roaring currents could never have happened without competently built ships ships like the famous Turtle ship known for its heavy armor and uniquely traditional design non-conback ships included transport ships and carriers they can get up to 19 meters long and carry 75 tons of cargo in 1895 the naval force was disbanded ending most large ship construction and during the Japanese Colonial period Japanese ship making companies monopolized the industry the Japanese mostly built small to medium-sized ships in Korea during the occupation era after World War II the Korean government took over their leftover facilities and equipment and started a company with them the Korea shipbuilding and Engineering Corporation or caseck was based in Busan and had originally been started by the Mitsubishi group in 1937 as part of the wartime effort for many years kasek was Korea's biggest and most advanced shipbuilder but that was insane much the company's major achievement during the 1960s was converting production from wooden to Steel ships they chugged along in 1960 Korea floated 4 224 tons of ship capacity five years later that tonnage grew to 13 788 tons by 1970 that was 39 100 tons impressive growth in 1967 they completed their largest ship yet a 6 000 ton steel ship in 1969 they exported 22 tuna fishing ships to Taiwan kasek wasn't terrible but they weren't great either kasak later went bankrupt it was then taken over by the hanjin chebor owner of the flagship airliner Korean Air and hanjin well I have a video about what happened after that we should take some time to discuss the global shipbuilding industry and the big ship value chain it begins with design the assembler works with the customer to decide on what to build as well as production and Engineering schedules behind the scenes the assembler communicates with its suppliers on critical items with long lead times like the engine steel plating and power generation slash propulsion thousands of Steel plates are cut bent and prepared for assembly we take them to the shipyard where we put them together on building blocks to slowly create the hull after that we then have to outfit that Hull with the thousands of pipes electrical cables furnishings and Machinery needed for that ship to function this all has to be well planned because rework here is very difficult when that is done we align and weld together the various prefabricated Parts including the piping we used to paint the whole thing during the final stages but when that became a production bottleneck we now do coding and painting throughout the entire cycle finally we flood The Quay and see if the ship floats if it does we go into commissioning where we fire up the various systems and check whether they work as per spec shipbuilding is an assembly industry this means that most of the final ship's value comes not from the shipyard but rather the suppliers with the exception of the United States just 20 to 30 percent of the ship's final value comes at the shipyard level and that percentage has generally decreased in recent years yet that is not to say that a shipyard has it easy these huge ships have so many parts a complex research vessel can have 550 000 Parts a cruise ship nine hundred thousand parts shipyards have to develop considerable coordination and Management Systems so that everything goes where it should and nothing gets lost far easier said than done in the 1960s the Pak tung-hee government sought to promote growth in various Industries with the heavy and chemical industrialization promotion policy shipbuilding was one such industry the government gave subsidies to shipbuilders and Exempted importation taxes for shipbuilding equipment then in 1968 the government armed with the expertise of retired Nippon steel Executives and capital from Japanese reparations established pohang Iron and steel or posco today Pasco is one of the world's biggest steel makers the sixth largest if you're going by 2021 production a domestic shipbuilding industry cannot flower without a powerful domestic steel industry posca is expanding steel capacity drove South Korea's rise in the automobile railroad container and Construction Industries in 1971 kasek received an order for six oil carriers in the range of 20 000 to 30 000 tons the Korean government noticed an opportunity in larger vessels like oil carriers and LNG ships in 1973 they set a public goal to have three shipyards capable of producing a million tons of gross tonnage by 1976 and by 1980 Korea would satisfy their own domestic demand and Export 3.2 million tons of ship volume capacity considering the then mediocre state of the Korean shipbuilding industry doing such a thing in just three years seemed irrational but the cheb oil stepped up first amongst them Hyundai Hyundai heavy Industries is a subsidiary of the Hyundai group Hyundai's chairman Chung Joo young was an aggressive businessman at the time they were Korea's largest chebor with a presence in automobiles engineering and construction they originally planned to build three medium-sized shipyards ranging at about 150 000 to 200 000 tons but upon revision they decide to build one super large Shipyard with a million ton capacity they chose to locate the shipyard and Olson's mipo Bay because of its easy access to various raw materials including steel from Costco then in 1972 Hyundai heavy won their first ship order two very large crude carriers each with 260 000 tons of capacity from the Greek shipping Tycoon George levanos great news but there were two snags the first was that he wanted the ships to be exactly the same as a recent ship produced by the Scottish shipbuilding firm Scott Lithgow the second problem was that Hyundai construction had not yet finished the shipyard so in order to save time Hyundai heavy decided to build both the ships and the yard at the same time to learn how to do this Hyundai looked abroad for someone to teach them in the late 1960s Chung discussed joint ventures with Japanese and Norwegian companies but none of these worked out the Japanese for instance forbade the transfer of their Advanced shipbuilding and welding techniques to South Korea Chung also discussed a more restrictive licensing agreement with A.G wesser of West Germany but that fell through because of cost finally they came across the United Kingdom in 1971 Chung met Charles Brook Longbottom a former member of parliament who chaired the Scottish Naval Architecture Firm ANP appledore today amp group the UK's largest ship repair and conversion company appledore offered to train Hyundai in how to design and develop a shipyard as well as how to staff and run it epidor would do the first yard layout themselves and hand over the drawings but for the two 260 000 ton crude carriers that was a bit more challenging appledore reached out to Scott Lithgow themselves one of the only three yards in the United Kingdom capable of building such ships in late March 1972 Hyundai broke ground on their massive Olson Shipyard a few weeks later the first cohort of 70 Engineers which includes middle managers and Foreman with training from Elite Korean universities went to Scotland for training each day they were sending back reports and information to help craft the massive Osan Shipyard as it was being built as one of the Koreans said we are trying to do in a few years what Western countries took many years to do in order to replicate those ships Hyundai used Scotland cow's own drawings use the same European suppliers and many of the same raw materials Scott Lithgow reviewed the size and thickness of each plate Scott Lithgow's Engineers knew that they were training competitor one director said if we did not train them then someone else would we were contributing to our own eventual downfall the Scottish relationship also brought the Japanese over the latter realizing that there no longer was any point in giving the Koreans the cold shoulder now they were missing out on business Kawasaki shipbuilding contributed some of their work procedures to the build even with foreign help Hyundai could not replicate the ship 100 you build a very large crude oil carrier in two separate halves and then mash them together for the first levano ship named the Atlantic Baron when they tried to put the two halves together they did not fit Hyundai set up a new design office to monitor construction but issues continued despite everyone working overtime from 6 AM to 3 AM the first ship's delivery date had to be pushed back from October 1973 to February 1974 the second ship also had to be delayed then came the oil crises of 1973 which wiped out demand for such large floating oil carriers shipbuilding activities in France Norway Sweden and other European countries would eventually fall by 90 percent from their peaks in the mid-1970s levanos refused delivery two other customers in Hong Kong and Japan also refused delivery this is not uncommon in times of oversupply but it left Hyundai in a bit of a tight spot here is where it's good to be a chebol Hyundai started their own shipping company Hyundai Merchant Marine which service their General Trading Company Hyundai Merchant Marine capably absorbed these new ships the South Korean government helped too by passing a law requiring that all crude oil deliveries to Korea had to be carried on korean-owned vessels today hmm as it is now known is one of the world's biggest transportation and shipping companies and Hyundai heavy benefited from the talents working in the Hyundai group Hyundai construction provided Frontline supervisors and reviewed feasibility studies and Hyundai Motors dispatch Engineers to reduce throughput time Hyundai heavy continued working on expanding their skills they hired ex-employees from Apple door to train technicians in skills like gas cutting piping sheet metal and drawing they struck more transfer agreements with other companies in Europe gradually they acquired the ability to do their own design modifications produce their own engines and improve their cost structures and over time they cut their throughput times to make delivery deadlines in 1973 Hyundai's pass rate and ship inspection was 38.1 percent by 1976 that rate rapidly improved to 84.1 percent on par with shipyards in developed countries two other treble soon followed Hyundai into the business in December 1978 Daewoo took over a partially completed Shipyard in okpo originally owned by kasak aided by a little State support they finished it in 1981. and in September 1979 Samsung acquired choreo's shipbuilding and began building up there too the two tables followed the same path as Hyundai absorbing foreign technology from European countries to kick-start their production systems Daewoo also worked with Scotland's Apple door while Samsung worked with the Danish firm berm meister and Wayne from 1976 to 1985 the Korean shipbuilding industry grew by 30 each year this is despite multiple oil shocks in fact the shocks might have helped the Koreans gain share the terrible shipping conditions wiped out International competition the 1985 Plaza Accord revalued the Japanese Yen giving Korean ships a cost advantage on currency values alone however the Japanese remained a formidable competitor Japan had a larger Merchant Fleet their labor productivity rates were 60 percent higher than the Koreans their integrated steel mills were just as efficient as possco throughout the late 1970s and into the 1980s and the Japanese government's wide-ranging domestic procurement systems kept local demand quite stable so Japan remained in the game despite Japanese labor costing 2.5 times more than Korean labor in 1989 the Korean government realized that shipbuilding capacity was getting a bit overheated Korean Shipyard profits had never been high margins were estimated to be just 2.8 percent in the early 1980s but now they edged towards oversupply so the government streamlined the industry prohibiting any more new Shipyard builds until 1993. they also pushed several companies to improve their cost structures starting a wave of consolidation and then came the Asian financial crisis in 1997. several Chapel like Hyundai and Daewoo broke apart due to debt issues but on the whole the Korean shipbuilding industry gained share against his world competitors like Japan that is because korean-built ships got even cheaper when the Korean Won crashed combined with the strong worldwide shipbuilding Market annual ship orders soared from 22 million to 37 million gross tonnage in 2000 South Korean shipbuilders finally surpassed the Japanese in terms of orders received Hyundai Daewoo and Samsung have retained their dominance since over the next two decades in 2020 some four percent of South Korea's exports are ships Korea's LNG and crude carriers are some of the best in the world but the shipbuilding industry is intensely competitive China has followed similar paths to become the world's second largest ship exporter a country's shipbuilding industry declines as its labor gets more expensive if the country cannot accordingly improve its labor productivity then it eventually loses competitiveness staying afloat only with government subsidies China's labor costs and Industrial policies are heavily backing their shipbuilders the Korean government and the chair Bowl they work with need to do as such to retain their leading position all right everyone that's it for tonight thanks for watching subscribe to the Channel Sign up for the newsletter and I'll see you guys next time

Channel: Asianometry

Views: 114,597

Keywords: asianometry

Id: _u75BlBu5vw

Length: 17min 47sec (1067 seconds)

Published: Sun May 14 2023