South Korea’s mid-sized shipbuilders are experiencing a significant resurgence after enduring a prolonged slump. Daehan Shipbuilding, located in Haenam, South Jeolla Province, was busy in June with two large tankers under construction in its dry dock. With an extensive order backlog of approximately 3 trillion won ($2.2 billion), the company operates at full capacity to meet its commitments.
Last year, Daehan achieved a remarkable 14% share in the global medium tanker market, alongside an impressive operating margin of 14%, largely due to its comprehensive in-house production system. K Shipbuilding, based in Jinhae, South Gyeongsang Province, reported an average operating rate of 110% in the first quarter of the year. This increase followed an already robust average of 93% last year.
An operating rate above 100% indicates continuous production, including nights and weekends. This relentless activity resulted in a 22.7% revenue increase to 285.6 billion won, and a staggering 404.9% rise in operating profit compared to the same quarter last year. Once on the verge of collapse due to a significant industry downturn, South Korea’s mid-sized shipbuilders are now reestablishing themselves.
The industry, previously comprising over 20 companies, has consolidated to four key players: Daehan Shipbuilding, HJ Shipbuilding & Construction (HJSC), K Shipbuilding, and Daesun Shipbuilding. All four entities reported operating profits in the first quarter, marking a notable achievement for three of them, as it was the first time in 14 years that they turned a profit simultaneously. With around 10,000 employees, their recovery is breathing new life into regional economies.
Restructuring initiatives have been crucial to their comeback, with companies shifting their focus from container ships—vulnerable to competition from Chinese shipyards—to tankers, chemical carriers, and patrol vessels where they hold a competitive advantage. Meanwhile, HJSC, formerly Hanjin Heavy Industries, has shifted its focus to naval defense, showcasing a range of vessels at the recent MADEX maritime defense exhibition, attracting attention from countries like the UAE and Egypt. K Shipbuilding’s turnaround is largely attributed to the rising demand for chemical tankers following the war in Ukraine, which redirected transport routes and inflated ship prices.
Daesun Shipbuilding, the smallest entity, is also working on restructuring to boost profitability by clearing out earlier low-priced contracts. After narrowing its losses in recent years, Daesun reported an operating profit of 1.2 billion won in the first quarter, and is exploring opportunities in the naval maintenance, repair, and overhaul market for future growth.