South Korean government: South Korea's three major shipbuilders will definitely not merge

2017-01-03 09:00

South Korea's Financial Services Commission (FSC) recently denied speculation that the country's three major shipbuilders will merge. FSC Chairman, Im Jong-yong, stated that a merger is not planned in order to maintain South Korea's leading position in the global shipbuilding market.

According to South Korean media reports, Im Jong-yong emphasized the importance of ensuring Daewoo Shipbuilding & Marine Engineering's position as a global leader. While there have been increasing calls to dissolve Daewoo Shipbuilding & Marine Engineering and merge it with Samsung Heavy Industries or Hyundai Heavy Industries Im Jong-yong rejected this plan. He stated that the three shipbuilders are currently undertaking their own restructuring plans, and that a merger would be detrimental to all three companies.

Daewoo Shipbuilding & Marine Engineering has faced intense scrutiny this year due to increased losses and exposure of accounting irregularities. However, Im Jong-yong believes that Daewoo Shipbuilding & Marine Engineering's competitiveness should be maintained; regardless of the restructuring plan, the government will not affect Daewoo Shipbuilding & Marine Engineering's R&D personnel, as these personnel are the best in the world, and if these R&D personnel choose shipbuilders in rival countries, the South Korean shipbuilding industry will face a serious crisis.

Im Jong-yong stated that the Financial Services Commission expects the global shipbuilding industry to recover in 2018, and therefore, it is essential to ensure the survival of Daewoo Shipbuilding & Marine Engineering.

In September, Clarkson predicted that global new ship orders will increase from 586 this year to 1322 in 2018. Simultaneously, the International Maritime Organization (IMO) also decided in September to implement stricter emission regulations earlier than planned, which will encourage shipowners to order new ships to replace older ones.

Im Jong-yong pointed out that the IMO sulfur emission limits will come into effect in 2020; considering that a new ship takes 2 to 3 years to build, the global new ship order volume will begin to increase in the second half of 2017.

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