Finance Minister Yoo Il-ho said Monday the government will order more than 250 public vessels, including naval and military vessels, worth more than 11 trillion won ($9.6 billion) by 2020 to help ailing local shipbuilders deal with the drying up of new orders.

For the shipping industry, the government will give 6.5 trillion won in fresh financing to help shippers secure new vessels, he said.


“The global shipbuilding industry is likely to recover from 2018. However, by 2020, orders will not reach the levels seen between 2011 and 2015,” Yoo said at a ministers’ meeting in Seoul.

“The government will encourage the shipbuilding industry to restructure their business into a competent and profitable one, as well as divert their focus to high value-added ship services from shipbuilding,” he said.

Out of the 11.2 trillion won, 7.5 trillion won will be first spent on ordering 63 public vessels by 2018. The remaining 3.7 trillion won will be financial support funds and capital for new ship orders, Yoo said.

The government’s plan came as the two ailing sectors, shipbuilding and shipping, are undergoing corporate restructuring amid a global slump in demand.

Workforce at the top three shipbuilders -- Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering -- will be cut by 32 percent to 42,000 from 62,000, and the number of docks will be reduced to 24 from 31 between 2015 and 2018, the government said.

Hyundai Heavy plans to spin off non-shipbuilding businesses, while Samsung Heavy plans a 1.1 trillion won capital increase by issuing new stocks. DSME is seeking to reduce offshore plant business and sell all of its assets aside from shipyards.

Spokespersons of Hyundai Heavy and DSME said the government’s plans on their companies are along the same direction as their self-help plans that they earlier announced some months ago.

At the press briefing, Finance Vice Minister Choi Sang-mok denied speculation that the government might have planned to force debt-ridden DSME out of the shipbuilding market.

Financial Services Commission Vice Chairman Jeong Eun-bo also said, “The government does not have any detailed plans to privatize DSME.” He noted, however, that there will be no additional financial support for DSME other than the government’s 4.2 trillion won injection promised last year. DSME is currently under a creditor-led workout program.

For the shipbuilding clustered regions along the southern coast, the government will inject 1.7 trillion won through 2017 to help companies cope with the crisis.

For the shipping industry, the government will double the size of a fund, which is designed to help secure new ships including bulk carriers and container ships, from the current 1.3 trillion won to 2.6 trillion won.

The government will also form a new company, taking investments from state-run policy banks, with 1 trillion won capital in the initial stage to support shipping companies to buy new vessels.

The plans for the shipping sector came after Hanjin Shipping was put under court receivership in early September, which caused a global logistics disruption.

Hanjin seeks to sell its assets such as vessels on the Asia-US route. Smaller rival Hyundai Merchant Marine, Korea Line Corp. and local private equity firm Hahn & Co. have submitted preliminary bids.

By Kim Yoon-mi (yoonmi@heraldcorp.com)