Additional 3.5 Trillion KRW Invested to Stabilize Maritime Industry Management

Improving the National Shipping Company's Structure
Additional 3.5 Trillion Investment to Lead Global Standards

The Ministry of Oceans and Fisheries has decided to invest 3.5 trillion won to stabilize the management of the shipping industry. This additional investment plan was announced just over five months after deciding to invest 3 trillion won last year. Through this, the capacity of national container shipping companies' fleet space (the space within ships available for cargo loading) will be expanded to 2 million TEU (20-foot equivalent units) by 2030, and support for small and medium-sized shipping companies with weak crisis response capabilities will be doubled. The tonnage tax system (a system that estimates profits based on the tonnage of ships and operating days instead of operating profit when calculating corporate tax for shipping companies) is also being considered for extension through consultations with the Ministry of Economy and Finance.

Kang Do-hyung, Minister of Oceans and Fisheries, is attending an emergency economic ministers' meeting held at the Government Seoul Office in Jongno-gu, Seoul, on the morning of the 15th, explaining measures to stabilize management and revitalize the shipping industry.
[Image source=Yonhap News]

On the 15th, the Ministry of Oceans and Fisheries announced the "Shipping Industry Management Stabilization and Vitality Enhancement Plan" at the Emergency Economic Ministers' Meeting held at the Government Seoul Office. In addition to the 2.99 trillion won planned for investment in the "Shipping Industry Competitiveness Enhancement Plan" announced last November, an additional fund of approximately 3.48 trillion won will be injected. Most of the additional funds will be raised through the creation of funds utilizing surplus funds from policy financial institutions such as the Korea Development Bank and the Korea Ocean Business Corporation. A Ministry of Oceans and Fisheries official explained, "The government budget will contribute about 100 billion won," adding that "most of the resources will be secured through fund formation."

Through this, the current national container shipping fleet capacity of 1.2 million TEU will be increased to 2 million TEU by 2030, and early achievement of complete decarbonization will be promoted for major national shipping companies. Autonomous routes will be created for shipping companies operating in increasingly competitive coastal routes to encourage the development of new routes and support business diversification. Support for small and medium-sized shipping companies, which have relatively weak crisis response capabilities, will be increased from the current 250 billion won to 500 billion won, doubling the scale. A customized support system will be established to provide financial services tailored to each company's business performance and financial conditions.

Song Myung-dal, Vice Minister of the Ministry of Oceans and Fisheries, is giving a preliminary briefing on measures to stabilize management and revitalize the shipping industry at the Ministry of Oceans and Fisheries press room in the Government Sejong Complex on the 11th.
[Image source=Yonhap News]

Institutional improvements will also be made to activate private ship investments. A Ministry of Oceans and Fisheries official stated, "We are promoting related legislation to enable small investors to invest in ships by utilizing blockchain technology such as token securities (securities issued digitally using distributed ledger technology)." To activate private eco-friendly investments, various investors will be encouraged to participate by promoting joint investment projects between cargo owners and shipping companies. The extension of the tonnage tax system is also underway. Vice Minister Song Young-dal said, "We have reached a certain level of agreement with the Ministry of Economy and Finance," adding, "Further practical consultations are needed, and since it involves legal amendments, it must also go through parliamentary review, but consensus has been formed."

The Ministry of Oceans and Fisheries decided to inject additional funds because the low freight rate situation in the shipping industry is expected to continue for some time. Maritime freight rates, which sharply declined from early 2022, have remained steady at pre-pandemic levels this year due to delayed economic recovery in major countries. The Shanghai Containerized Freight Index (SCFI), which averaged 3,410 in 2022, dropped to 1,745 as of the 3rd of this month. The Ministry anticipates worsening management conditions for national shipping companies due to increased supply from large-scale ship deliveries and global uncertainties caused by regional conflicts.

"We will continue efforts to find an owner for HMM"

A promotional video is playing on the screen installed at the HMM headquarters in Yeouido, Seoul.
[Photo by Yonhap News]

The sale of the national shipping company HMM will be pursued again. Vice Minister Song said, "We are consulting with related agencies regarding the timing of the sale," and added, "We believe privatization should happen as soon as possible." In February, negotiations for the sale of HMM between the Korea Development Bank and the Pan Ocean-JKL consortium of the Harim Group were ultimately broken off.

Minister Kang Do-hyung of the Ministry of Oceans and Fisheries emphasized, "In a situation where global economic uncertainties have increased, the world's second-largest container shipping company is recording losses, indicating unfavorable conditions in the shipping market, and the impact of eco-friendly regulations is gradually becoming visible," adding, "The government and the private sector will work together proactively to improve the structure of national shipping companies so that our shipping industry can overcome the current crisis and continue to grow and develop."