But the global appetite for new tankers and containerships has rebounded quickly on the back of China¡¯s thriving economy, which has piqued the demand for maritime transportation. The world¡¯s fastest-growing economy is a magnet for raw materials and energy imports needed to fuel the breakneck development of its heavy industries. China¡¯s trade volume grows apace as the country emerges as a manufacturing hub for the world¡¯s leading companies.

Orders for double-hulled oil tankers exploded after the accident of the Spanish tanker Prestige in November 2002, as European countries moved to ban the entry of old (singled-hulled) tankers into their territorial waters for fear of oil spills.

With global business conditions turning unexpectedly favorable, the Shipbuilding Division of Hyundai Heavy Industries (HHI) won orders for 112 ships valued at $5.9 billion during the first nine months of 2003, with backlogged orders soaring to 180 ships worth more than $10 billion. The new orders received in the January-September period represented a significant increase over the figure of 56 vessels worth $2.6 billion that the world¡¯s top-ranked shipyard raked in for all of 2002. HHI, which commands about 15% of the world¡¯s shipbuilding market, earlier targeted new shipbuilding orders of 52 ships worth $3.0 billion for 2003. ¡°We are now again in a position to raise prices,¡± said an official at HHI's Shipbuilding Division. ¡°Given that our order backlog will keep us busy for the next three years, we must become more selective in receiving orders.¡±
The Ministry of Commerce, Industry and Energy says new shipbuilding orders won by South Korea¡¯s shipyards during the first half of this year jumped nearly threefold to 7.81 million compensated gross tons (CGTs), comprising 233 ships worth $10.6 billion. New orders for the same period last year were only 2.68 million CGTs for 86 ships valued at $3.9 billion. ¡°It is true the Prestige accident and the ¡®China effect¡¯ have rekindled the shipbuilding boom. But Korean shipbuilders were better positioned to take advantage of the boom because they were ready to offer the most competitive package of quality, expertise and value available anywhere,¡± a ministry official says.

The economic rebound forecast for the first half of 2004 may present another boon to HHI¡¯s Shipbuilding Division. Stronger cargo transportation would prompt an increase in shipping freight, buoying the demand for larger containerships, bulk carriers and VLCCs.

In March 2002, HHI opened a new chapter in world shipbuilding history by delivering a total of 1,000 ships amounting to 80 million deadweight tons to 196 shipowners in 43 countries since 1972. The sheer volume is unprecedented for a single shipbuilder. It is all the more impressive as it was accomplished in such a remarkably short span of time. It was Chung Juyung, late founder of the Hyundai Group, who led the construction of Hyundai¡¯s shipyard. Starting the Hyundai business group as a construction company in 1947, Chung was an entrepreneur who contributed to building up the Korean economy from scratch with grit, determination and pioneering spirit.

When Chung decided to enter the shipbuilding market, Hyundai had no experience, capital or technology. Despite that, he was able to coax George Livanos of Greece to place orders for two 260,000-dwt VLCCs even before the shipyard was built. In March 1972, ground was broken on an empty stretch of beach in Ulsan to construct what would become the world¡¯s largest shipyard. Two years later, a ceremony was held to mark the completion of the shipyard, and at the same time christen the first two VLCCs. The world¡¯s shipbuilding community calls the event the ¡°Hyundai Shipyard Miracle.¡± Until that time, the largest ship Korea had ever built was a 17,000-dwt cargo ship, and Korea¡¯s global shipbuilding market share was less than 1%.

Hyundai¡¯s optimism about entering the shipbuilding business was wellfounded. As the largest general contractor in Korea, had worked hard to expand its business in overseas markets. Having sensed enormous business opportunities in the Middle East, Chung wanted to add shipbuilding to his plans for the construction of harbors, plants and other industrial facilities in the region. Following in the footsteps of Hyundai¡¯s success, two other Korean shipbuilders (Daewoo Shipbuilding and Samsung Heavy) have also grown into the world¡¯s second and third largest shipbuilders, respectively.

In addition, the Korean shipbuilding industry has the world¡¯s best-run steel producer, Pohang Iron and Steel Co. (POSCO), which can offer good prices for large-scale orders. With world-class suppliers of steel and marine engines in its backyard, Korea¡¯s shipbuilding industry is now roughly 90% self-sufficient.

More recently, the recession following the 1997-98 Asian financial crisis forced the high-quality workforce to stay and freshly flow into the traditional manufacturing sector. A steep fall in the value of the won currency against the dollar, induced by the economic hardships, gave Korean yards an additional price advantage over their rivals in Japan and Europe. The won-dollar exchange rate, which stands around 1,180 won per dollar today, rose to as high as 2,000 in late 1997 from about 800 in the months prior to the crisis.

Despite the challenge of cheaper Chinese labor, Korean yards look well poised to maintain their shipbuilding prowess for years to come, thanks to efforts to shift to highervalue segments of the shipbuilding market. Aided by the development of other industrial sectors and state support, Chinese shipyards are catching up fast in the lower segments of oil tankers, containerships and bulk carriers. Some experts say it may only be a matter of time before Chinese rivals overtake Korea and Japan in the lower segments of the market.

But Koreans are unlikely to be easily surpassed by Chinese competitors, as the former are able to offer many advantages, such as better designs, more competitive options and shorter delivery times. To safeguard their future, Korean yards have begun to make inroads into the passenger ship market, as well as LNG carriers and other higher-value ships.

In its latest foray into more sophisticated niches of the shipbuilding market, Hyundai Heavy has agreed with EnerSea Transport LLC of the US to jointly develop compressed natural gas (CNG) carriers. Unlike conventional LNG ships that keep LNG at a temperature of -163¡Æ Celsius at near atmospheric pressure, CNG carriers are high-tech vessel that allows natural gas to be transported at a temperature of -29¡Æ Celsius at pressures up to 128 bar (1850 psi) in a gaseous state. Having onefourth of the load capacity of an LNG carrier, a CNG carrier does not require the additional and costly processes in LNG transportation, such as reliquefying and revaporizing the gas. Mating EnerSea¡¯s tanker design and transportation system with HHI's hull design and propulsion mechanism, the design of the new ship was completed early this year.

The Shipbuilding Division of HHI has also launched its first membranetype LNG carrier this year, thus becoming the unique shipyard in the world to build both moss and membrane types of LNG carriers. The writer is a journalist based in Seoul.