[No One to Build Ships①] Global Order Leader... "10,000 Workers Short in September"

Global No.1 in Orders, Work Floods In
Meanwhile, Labor Shortage Worsens
Restructuring and Low-Price Competition Lead to Persistent Low Wages in Subcontracting
Increased Pressure in Second Half of This Year as Order-Receiving Plants Begin Production

Editor's NoteSouth Korea's shipbuilding industry is sweeping up global orders with eco-friendly vessels such as LNG (liquefied natural gas) carriers and propulsion ships leading the way. However, the workforce that left during the prolonged downturn is not returning. Despite having orders, it is difficult to find workers, leading to a "cry of agony amid the boom." Both the previous and current governments have introduced measures to train shipbuilding personnel and secure foreign labor, but these are seen as solutions that fail to address structural problems. Although it is a period of order boom, doubts remain about whether the structural issues of the shipbuilding industry?such as continued deficits, cutthroat competition, and low wages?can be resolved. Talented individuals who should be responsible for future growth are avoiding the shipbuilding sector, and skilled craftsmen needed for construction work are not moving despite reports of labor shortages at shipyards. Due to the long-lasting downturn, the treatment of workers in shipbuilding has worsened compared to other industries, and the gap between downturn and boom periods has increased, lowering employment stability. The issue is not just about securing skilled workers but also urgently acquiring high-level personnel in eco-friendly ship technology and design. This article examines how to solve the problems facing the shipbuilding industry.

[Asia Economy Reporter Choi Seoyoon] Although South Korea's shipbuilding industry maintained its global number one position in orders in the first half of this year following last year, the atmosphere on the ground is cold. The labor shortage crisis is becoming increasingly severe. More than 9,500 workers are expected to be lacking as early as next month. Voices of frustration are emerging inside and outside the industry, saying, "What good is being number one in orders if there is no one to build the ships?" The entrenchment of low wages is cited as the main reason for the labor shortage. In the second half of this year, when ship design work lasting 10 months to a year after orders is completed and full-scale production begins, the burden on manufacturing sites is expected to increase.

Ulsan Dong-gu Hyundai Heavy Industries Shipyard view. [Image source=Yonhap News]

According to Clarkson Research, a UK-based shipbuilding and shipping market analysis firm, South Korea's shipbuilding industry secured 9.94 million CGT (184 vessels, 46%) in new orders in the first half of this year, surpassing China for the first time in four years. In July, an additional 1.16 million CGT (19 vessels, 55%) was added, maintaining the top position for three consecutive months.

In particular, the volume of LNG carrier orders, which South Korean shipbuilders have almost monopolized, is rapidly increasing. Global LNG carrier orders from January to July this year reached 103 vessels, a 184% increase compared to one year ago. Along with the increase in orders, ship prices have been rising for 20 consecutive months. The newbuilding price index, which quantifies shipbuilding prices, stood at 161.6 points in July, up 11.8% from the same period last year.

Although orders for high-value-added ships are increasing and ship prices are rising, there is a shortage of production personnel to handle this. According to the Korea Offshore & Shipbuilding Association, 60,336 workers are needed in September to handle the order volume, but as of December last year, only 58,027 were available, resulting in a projected shortage of 9,509 workers. The expected shortage of workers will increase to 11,099 by June next year.

The impact of workforce restructuring since the shipbuilding downturn began in earnest in 2015 is significant. The number of shipbuilding workers dropped from around 200,000 in 2014 to 90,000 last year, a decrease of more than 110,000 (54%) over seven years. Professor Cho Daeseung of the Department of Naval Architecture and Ocean Engineering at Pusan National University explained, "During the downturn, shipbuilding workers, including skilled workers, inevitably moved en masse to other industries such as construction, and those who left have not returned. The prolonged downturn also led to neglect in technical training for new workers in welding, grinding metal, hull painting, and other skills across the shipbuilding industry," he diagnosed.

The biggest problem is low wages relative to the intensity of labor. Kim (50, Ulsan), who works in production at Hyundai Heavy Industries, said, "Even if young workers in their 30s and 40s come in, they cannot endure the dangerous and tough work and go to construction sites that pay more. Because skills are not accumulated, the positions left by skilled workers are not being filled," he lamented.

Daily wages at shipbuilding sites are around 100,000 KRW, which is far lower than the 180,000 to 200,000 KRW levels at onshore plants or other manufacturers. Analysts say this is a result of China's low-price offensive starting in the early 2000s and excessive cutthroat competition among the three major domestic shipbuilders, with the burden passed on to on-site workers.

A subcontractor at a shipyard said, "Most workers on site earn the minimum wage or just 1,000 to 2,000 KRW more per hour. Even after working for over 20 years, wages are similar to those of beginners, so there is no reason to return to shipbuilding where wage increases are uncertain," he said.