Shipbuilding Contract between Norwegian Buyers and Korean builders : Subcontracting

by Byoung Il Kang

Institution: University of Oslo
Year: 1000
Keywords: VDP::340
Record ID: 1282263
Full text PDF: https://www.duo.uio.no/handle/10852/20829


Market researcher Clarkson Research Studies reports that Korea's total amount of ship orders in the first 11 months of 2005 amounted to 13.9 million compensated gross tonnage (CGT), or about 39 percent of the global market (35.5 million CGT). This outstrips the combined orders won by Japan (5.9 million CGT) and the whole of Europe (7.4 million CGT). Korea is the world s largest shipbuilding nation and Korean shipbuilders are expected to lead the global market for the next decade. Korean firms have secured enough orders for future, especially increased orders for liquefied natural gas (LNG) carriers. There are almost 80 shipbuilders in Korea, but nine major shipbuilders, who are members of the Korea Shipbuilders Association (KSA), take most of the shipbuilding orders. Seven of them are among the world's top 10. The main players are Hyundai Heavy Industries (HHI), Samsung Heavy Industries (SHI), Daewoo Shipbuilding & Marine Engineering (DSME) and Hanjin Heavy Industries & Construction (HHIC). These giant monsters have threatened other shipbuilding nations, especially Europe. The EU has accused Korean shipbuilders of threatening the future of Europe s shipbuilding industry through unfair subsidies and took some actions against Korea as follows. In 1999, European Commission reported to the Council on the situation in world shipbuilding, which showed European yards trapped in a crisis of downward spiraling prices, due in large part to excess capacities in South Korea. This report promoted the European Commission to issue a proposal for a Council Decision on the signing and conclusion of an International Agreement between the European Community and Korea relating to assistance of the world shipbuilding market. Eventually, the European Communities took Korea to the WTO in 2002, claiming that Korean shipbuilders received subsidies in the wake of the Asian financial crisis of 1997. Moreover the EU has had Temporary Defensive Mechanism for Shipbuilding (the "TDM Regulation"), which is keeping Korean builders from selling vessels in the European market. Norwegian shipbuilding industry also has dramatically declined, being trapped in a crisis since 1998 under pressure by increased competition from Asia, but it survived by shifting production towards the national offshore oil and gas industry and ship equipment manufacturing. Norway becomes a leading manufacturer of ship s gear in the world. Korea is a major market for Norwegian suppliers of ship s gear and related service. Therefore, good prospects for Korean shipyards are good news for the Norwegian supply industry. Trade and investments between Norway and Korea has grown significantly over the past ten years in maritime industry and Korea is today one of Norway's major trade partners in Asia. Norway has one of the world s largest commercial shipping fleets, so Norwegian shipowners are one of major target for Korean shipbuilders. In fact, Norwegian shipowners have built many of their ships at the Korean shipyards. These ships have been big oil tankers,…