South Korea counts on shipbuilding to ease US tariff woes
Already hit by sector levies on steel and car exports, Seoul is laser-focused on negotiations over a 25 percent country-specific tariff that has been suspended until July 8.
AFP takes a look at what's going on:
- Why shipbuilding? -
In the 1970s, South Korea's military leader president Park Chung-hee accelerated the country's heavy industry, designating sectors such as steel and shipbuilding "strategically important" and rolling out state subsidies.
At the same time, POSCO was founded -- now one of the world's largest steel producers -- and conglomerate Hyundai built its shipyard in southeastern Ulsan, which started to grow rapidly.
European rivals struggled to keep pace.
Sweden's Kockums Shipyard filed for bankruptcy in 1987 -- and in a symbolic shift of global shipbuilding power, Hyundai acquired its 140-metre (460-foot) Goliath crane for one dollar. It now towers over southern Ulsan.
In the 1990s and 2000s, South Korean shipbuilders such as Hyundai Heavy Industries and Samsung Heavy Industries ramped up investment in research and development, backed by generous government subsidies.
The country secured a competitive edge in high-value-added vessels, including LNG carriers, very large crude carriers, and offshore platforms.
Now, South Korea ranks as the world's second-largest shipbuilding nation, trailing only behind China.
- Is it important? -
South Korea's exports hit a record high in 2024, with analysts pointing to shipbuilding as one of the key drivers.
The sector accounted for nearly four percent of total exports and grew by almost 20 percent from the previous year -- reaching $25.6 billion.
Shipbuilding directly employs around 120,000 workers -- roughly one percent of the country's total workforce -- with indirect employment significantly higher in industrial hubs like Ulsan.
Industry data shows so far this year, new orders have exceeded 13 trillion won ($9.4 billion).
In March, Hanwha Ocean secured a landmark $1.6 billion contract to build LNG carriers for Taiwan's Evergreen Marine, one of the largest single orders in the sector this year.
- Why is it a 'bargaining chip'? -
Trump has showed "significant interest in South Korea-US shipbuilding cooperation," said South Korea's trade, industry and energy minister Ahn Duk-geun in April.
Like the Europeans, the US shipbuilding industry has lagged behind South Korea and China, and as a result, the sector is seen as a "highly important bargaining chip in trade negotiations," he added.
At an APEC finance ministers' meeting in South Korea in May, US Trade Representative Jamieson Greer met Chung Ki-sun, vice chairman of HD Hyundai, the country's largest shipbuilder, before he met Seoul's top officials.
"South Korea's shipbuilding and defence industries see a window of opportunity," said Kim Dae-jong, a professor at Sejong University.
- How does it help the US? -
Greer also met with the CEO of Hanwha Ocean, the first non-American company authorised to carry out a dry-dock maintenance of a US Navy vessel.
The move last September was seen as significant as it signalled that Washington sees South Korea, where it already has 28,000 US troops stationed, as a strategic defence hub.
With worries growing about China's expanding naval fleet and potential conflict in the Taiwan Strait, the US has begun seeking reliable overseas shipyards to support its operations in the Asia-Pacific region.
The global market for ship maintenance, repair, and overhaul is projected to exceed $60 billion annually, according to industry estimates.
- Any problems? -
Despite multi-billion-dollar contracts, data suggests South Korea's shipbuilding industry is losing ground in the global race.
China dominates with South Korea's market share dropping, according to industry data.
Demand for eco-friendly vessels is rising, and the government need to overhaul regulations "to support the development of next-generation eco-friendly vessels," Rhee Shin-hyung, a professor at Seoul National University, told AFP.
South Korea's woeful demographics also make staffing hard. In Geoje -– home to Samsung Heavy Industries -– the number of residents in their 20s and 30s has nearly halved in recent years.
Orders are down in 2025 which hints that "the shipbuilding boom may end sooner than the market anticipated," warned Rhee.
Global ship orders between January and April fell by almost half the volume recorded during the same period last year.
Shipbuilders have been enjoying a "supercycle" but unfortunately the "peak is expected to be lower and the boom shorter-lived compared to the past," Nam Chul, vice president at HD Hyundai Heavy Industries, told AFP.
hs/ceb/ecl
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
New York Times
19 minutes ago
- New York Times
Volkswagen Hit Hard by Trump's Tariffs
Volkswagen's profit dropped by a third in the first half of the year, the German auto giant said on Friday, dragged down by the tough market for electric cars and President Trump's tariffs. The carmaker was the latest in Europe to report a dent in earnings because of the 25 percent additional tariff imposed by Mr. Trump on cars imported to the United States, following Stellantis and Volvo Cars. Volkswagen said that tariffs cost it 1.3 billion euros ($1.5 billion) in the first six months of the year, leading to a 33 percent decline in operating profit, to €6.7 billion. The company's revenue was roughly the same as the previous year. One bright spot was an increase in the number of cars delivered in Europe, where Volkswagen has overtaken Tesla as the market leader in electric vehicles. Arno Antlitz, Volkswagen's chief financial officer, said it was a 'mixed picture,' citing the contrast between the resonance among car buyers for its newest models and the general challenges that are electric cars are facing, along with the drag of tariffs. European carmakers have been squeezed since Mr. Trump imposed steep tariffs on imported vehicles. Automakers rely on global supply chains, making them vulnerable to increased import taxes. A 50 percent U.S. tariff on steel and aluminum — essential materials for car production — added further strain. Want all of The Times? Subscribe.
News24
20 minutes ago
- News24
Volkswagen takes R27bn global hit from Trump tariffs
For more financial news, go to the News24 Business front page. German auto giant Volkswagen said Friday that tariffs imposed by US President Donald Trump had cost it 1.3 billion (R27 billion) euros in the first half of the year as it reported falling profit. Overall net profit fell 38.5 percent year-on-year during the period to hit 7.28 billion euros (R150 billion). Higher-sales of lower-margin electric vehicles (EVs) as well as restructuring costs hit the result in addition to the tariffs, Volkswagen said. Finance chief Arno Antlitz said Volkswagen was nevertheless "on the right track" and that performance was at the "upper end of expectations", if tariffs and restructuring costs are excluded. The firm struck an unprecedented deal with unions last December to cut 35 000 jobs in Germany by 2030 as part of plans to save 15 billion euros a year. The 10-brand group also cut its revenue and profit outlook, warning of "political uncertainty and increased barriers to trade" for the remainder of the year. It now forecasts a profit margin for the year of between 4 and 5 percent, down from 5.5 to 6.5 percent previously, amounting to billions of euros for the firm. The range assumes that the United States will continue to levy tariffs of 10 percent on imported cars in the best case and stick to its current rate of 27.5 percent in the worst, Volkswagen said. Volkswagen's previous guidance, released in April shortly after new US tariffs took effect, did not take the increased duties into account. Sales by volume in North America fell 16 percent "mainly due to tariffs" in the first half even as they rose slightly worldwide, Volkswagen said. Trump in April slapped an additional 25-percent levy on imported cars as part of an aggressive trade policy he says will help boost US manufacturing. That has hit European carmakers. French group Stellantis - whose brands include Jeep, Citroen and Fiat - said on Monday that North American vehicle sales by volume plunged 25 percent in the second quarter of the year. US and European Union diplomats are currently negotiating ahead of the latest deadline set by Trump, with Trump threatening a blanket duty of 30 percent after August 1 if no agreement is reached.
Boston Globe
an hour ago
- Boston Globe
Europeans and Iran meet in Istanbul as the return of sanctions looms over nuclear deadlock
The return of sanctions, known as a 'snapback' mechanism, 'remains on the table,' according to a European diplomat speaking on condition of anonymity due to the sensitivity of the talks. 'A possible delay in triggering snapback has been floated to the Iranians on the condition that there is credible diplomatic engagement by Iran, that they resume full cooperation with the IAEA (International Atomic Energy Agency), and that they address concerns about their highly-enriched uranium stockpile,' the diplomat said. European leaders have said sanctions will resume by the end of August if there is no progress on containing Iran's nuclear program. Advertisement Tehran, meanwhile, has said the U.S., which withdrew from the 2015 deal during President Donald Trump 's first term, needs to rebuild faith in its role in negotiations. Deputy Foreign Minister Kazem Gharibabadi said Iran's engagement was dependent on 'several key principles' that included 'rebuilding Iran's trust – as Iran has absolutely no trust in the United States.' In a social media post Thursday, he also said the talks shouldn't be used 'as a platform for hidden agendas such as military action.' Gharibabadi insisted that Iran's right to enrich uranium 'in line with its legitimate needs' be respected and sanctions removed. Advertisement Iran has repeatedly threatened to leave the Nuclear Nonproliferation Treaty, which commits it to refrain from developing nuclear weapons, if sanctions return. Friday's talks were being held at the deputy ministerial level, with Iran sending Deputy Foreign Minister Majid Takht-e Ravanchi. A similar meeting was held in Istanbul in May. The identity of the E3 representatives were not immediately clear but the European Union's deputy foreign policy commissioner was thought to be attending. The U.K., France and Germany were signatories to the 2015 deal, alongside the U.S., Russia and China. When the U.S. withdrew in 2018, Trump insisted the agreement wasn't tough enough. Under the original deal, neither Russia nor China can veto reimposed sanctions. Since the Israeli and U.S. strikes on Iran, which saw American B-52 bombers hit three nuclear sites, Iran's Foreign Minister Abbas Araghchi has accused the E3 of hypocrisy, saying they failed to uphold their obligations while supporting Israel's attacks. Against the backdrop of the conflict, which saw Iran respond with missile attacks on Israel and a strike on a U.S. base in Qatar, the road ahead remains uncertain. While European officials have said they want to avoid further conflict and are open to a negotiated solution, they have warned that time is running out. Tehran maintains it is open to diplomacy, though it recently suspended cooperation with the IAEA. A central concern for Western powers was highlighted when the IAEA reported in May that Iran's stockpile of uranium enriched to 60% – just below weapons-grade level – had grown to over 400 kilograms (882 pounds). Advertisement In an interview with Al Jazeera that aired Wednesday, Iranian President Masoud Pezeshkian said Iran is prepared for another war and reiterated that its nuclear program will continue within the framework of international law while adding the country had no intention of pursuing nuclear weapons. A spokesman for Iran's Atomic Energy Organization said Thursday the country's nuclear industry would 'grow back and thrive again' after the recent attacks by Israel and the U.S. Vahdat reported from Tehran, Iran. Associated Press writer Stephanie Lichtenstein in Vienna contributed to this report.
