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South Korea Bolsters Shipbuilding Industry with $10.75 Billion Financial Support

In a significant move to bolster South Korea’s shipbuilding industry, Minister of Trade, Industry and Energy Ahn Duk-geun and Financial Services Commission Chairman Kim Joo-hyun convened a “K-Shipbuilding Export Finance Support Agreement Ceremony” and a “Shipbuilding Companies Meeting” at The Plaza Hotel in Jung-gu, Seoul, on the morning of June 17.

The event saw the participation of key figures from the nation’s financial and shipbuilding sectors, including the heads of the five major banks—KB Kookmin, Hana, Shinhan, Woori, and NH Nonghyup—as well as three regional banks—Gyeongnam, Gwangju, and Busan. Representatives from four policy financial institutions—KDB Korea Development Bank, IBK Industrial Bank of Korea, Korea Trade Insurance Corporation, and Korea Eximbank—were also present, alongside executives from three shipbuilding companies—HD Hyundai Heavy Industries, Daehan Shipbuilding, and K Shipbuilding.

The government and 12 financial institutions have committed to providing a total of $10.75 billion (approximately 15 trillion won) in “Refund Guarantees” (RGs) to enhance the competitiveness of domestic shipbuilding orders and expand exports. This initiative is expected to significantly support the construction and export of ships, a critical sector for South Korea’s economy.

According to the agreement, nine banks, including the five major banks, three regional banks, and IBK, will support RGs worth approximately $260 million, with $30 million allocated for each of the nine ships already ordered by medium-sized shipbuilders. The government anticipates that this financial backing will facilitate the smooth construction of these nine ships, valued at $700 million. Typically, shipowners pay 40% of the shipbuilding cost as an advance payment to the shipbuilder, and RGs serve as a guarantee that if the shipbuilder fails to deliver the ship properly, the financial institution will cover the advance payment.

KDB Korea Development Bank will also issue RGs worth $260 million for ships already ordered by medium-sized shipbuilders and plans to issue an additional $160 million in RGs for future orders. Furthermore, Korea Trade Insurance Corporation will increase the special guarantee ratio for shipowner RGs from 85% to 95%, thereby reducing the banks’ guarantee burden from the existing 15% to 5%.

This marks the first time that policy banks and regional banks have jointly participated in issuing RGs for medium-sized shipbuilders. Through this agreement, a total of $680 million (approximately 1 trillion won) in RGs will be supplied to medium-sized shipbuilders. Notably, the five major banks have resumed issuing RGs to medium-sized shipbuilders for the first time in 11 years, following significant RG losses during the shipbuilding industry downturn. On this day, Shinhan Bank issued the first RG for a crude oil tanker ordered by Daehan Shipbuilding from a Belgian shipowner.

For large shipbuilders such as HD Hyundai Heavy Industries, Hyundai Samho Heavy Industries, Hyundai Mipo Dockyard, and Samsung Heavy Industries, the five civil major banks, along with state-owned banks like KDB, Eximbank and IBK, have provided a new RG limit of $10.07 billion (14 trillion won). These large shipbuilders have nearly exhausted their existing RG limits due to the recent boom in orders for high-value ships such as LNG carriers.

Minister Ahn emphasized the collaborative effort between the public and private sectors, stating, “The public and private sectors will work as one team to fully support the entire process from order to construction to export, and we plan to establish a ‘K-Shipbuilding Super Gap Technology Roadmap’ next month to fend off the pursuit of latecomer competitors.”

This comprehensive financial support is expected to not only stabilize the shipbuilding industry but also enhance its global competitiveness, ensuring that South Korea remains a leading player in the global shipbuilding market. The establishment of the “K-Shipbuilding Super Gap Technology Roadmap” next month aims to further solidify this position by fostering technological advancements and innovation within the industry.
Source: Business Korea

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