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A crude oil tanker built by Daewoo Shipbuilding & Marine Engineering traverses the ocean. (provided by DSME)

The South Korean shipbuilding industry led the world in orders in the first half of the year, the first time it has done so in four years, since 2018.

While the industry is flooded with orders, there aren’t enough workers to build the ships. The workforce shortage is being aggravated by the fact that shipbuilding wages and working conditions aren’t as attractive as for onshore plants.

The Korean Ministry of Trade, Industry and Energy (MOTIE) announced Wednesday that the domestic shipbuilding industry’s orders in the first half of the year added up to 9.79 million in compensated gross tonnage (CGT), the standard measurement for ship construction.

Korea’s orders amounted to 45.5% of the world’s total order volume of 21.53 million CGT. China came in second with 9.35 million CGT (43%).

Korea also claimed the highest share of order value, at 47% (US$26.5 billion), ahead of China’s 40% (US$22.3 billion).

“If we exclude the first half of last year (10.84 million CGT), when there was a surge in ship orders that had been postponed because of COVID-19, this was the highest amount of orders since the first half of 2011 (10.36 million CGT),” the ministry said.

After placing first in the world for ship orders for the first half of the year in 2018 (6.64 million CGT, 35%), Korea was passed by China the following year and had remained behind ever since. In the early stages of the COVID-19 pandemic during the first half of 2020, its share dipped as low as 14% (1.33 million CGT).

The sharp rise in shipbuilding industry orders has led to a workforce shortage. The short labor supply in the industry had already become a serious issue when ship orders began rising in the fourth quarter of 2020, after remaining stagnant early on in the pandemic.

According to the Korea Offshore & Shipbuilding Association (KOSHIPA), employment in the Korean shipbuilding industry currently stands below 100,000 — less than half the 200,000+ workers employed there at its height in 2014.

Given the increase in orders since 2020, the necessary employment at the moment is estimated at around 120,000 workers, indicating a shortfall of roughly 20,000 to 30,000.

“Between 2015 and 2016, the big shipyards let go of a lot of workers due to financial difficulties,” explained Park Jong-shik, a research fellow at the Korea Labor Institute.

“At the time, they anticipated that the workers who left would come back when the time came, but the reality turned out to be a different story,” he added.

The reasons have to do with the more dangerous duties and relatively low pay compared with onshore plant employment, such as battery factories or the Samsung Electronics semiconductor plant in Pyeongtaek.

Amid its current workforce shortage, the shipbuilding industry pays between 130,000 and 140,000 won, or roughly US$100, per day — much lower than the minimum of 180,000 won paid where semiconductor facilities and battery factories are built.

“Ship construction typically starts around a year after the order is received,” Park explained. “Unless measures are taken for the working environment and pay, it’s unclear who is going to build the ships that have been ordered.”

As of late June, total orders for Korea’s shipbuilding companies were calculated at 35.08 million CGT, or 28% more than the 27.37 million CGT recorded for the same time last year.

The MOTIE said, “For the big three shipbuilders [Hyundai Heavy Industries, Samsung Heavy Industries, and Daewoo Shipbuilding & Marine Engineering], dock reservations are already filling up between 2025 and 2026.”

Korean companies — Samsung Heavy Industries, Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering, and Hyundai Samho Heavy Industries — occupy the top four spots in the rankings of the world’s shipbuilders by total orders. China’s Hudong-Zhonghua Shipbuilding comes in fifth.

The MOTIE predicted that the boom in global orders and Korean shipbuilding business is likely to continue in light of the rising demand for eco-friendly ships based on International Maritime Organization environment regulations, and additional LNG carrier orders from Qatar in the second half of the year.

The ministry also said it would “continue to support the shipbuilding industry as it establishes future competitiveness with autonomous ships and eco-friendly vessels.”

By Kim Young-bae, senior staff writer

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